The Hindu Business Line : Norms laid out for tax rebates on services exports

THE Finance Ministry on Tuesday spelt out the procedures and conditions that service providers needed to comply with for undertaking services exports without payment of any service tax.

The revenue department has also prescribed detailed procedures, conditions and limitations for availing rebate of service tax and cess paid on input services and excise duty paid on inputs used in the taxable services that are exported.

While specifying the conditions and limitations for availing rebate of service tax paid on input services, the revenue department has made it clear that the rebate would be available only when taxable services are exported to countries other than Nepal and Bhutan and the payment for providing such services have been received in convertible foreign exchange.

Further, no Cenvat credit should have been availed on inputs and input services on which rebate has been claimed.

The revenue department's move to specify the procedures, conditions and limitations, for availing service tax exemption on services exports and rebate of tax paid on input services or duty paid on the inputs used, has come more than a month after the Finance Ministry notified the Export of Services Rules 2005.

The Export of Services Rules 2005, which was issued in the first week of March 2005, sought to spell out the meaning of such exports. Acknowledging that export of services cannot be defined in the same way as export of goods, since services are not tangible, the Finance Ministry held that services are treated as exports if a person outside the country ordered them and such services were delivered outside the country.

In other words, the recipient of the service who is the principal beneficiary of the service should be outside the country.

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