The Hindu Business Line : Service tax waiver on payments in convertible forex may go

THE Finance Ministry has hinted that the existing service tax exemption on taxable services for which payments are received in convertible foreign exchange would be withdrawn as soon as the rules spelling out the meaning of `export of taxable services' are finalised.

The rules concerning export of services are to be finalised in the next one month and likely to form part of the existing service tax rules.

"We will finalise the rules in the next one month after consultations with the Commerce Ministry. Once the rules are finalised. I see no reason as to why the service tax exemption on payments received in convertible foreign exchange should exist," a Finance Ministry official told Business Line on the sidelines of an interactive session on service tax, organised by the PHD Chamber of Commerce and Industry (PHDCCI) here.

He pointed out that the foreign trade policy currently specifies that services for which payments are received in convertible foreign exchange are exempted from service tax.

"We would not like to come up with rules that would contradict with the stance taken in the Foreign Trade Policy. We would hold discussions with the Commerce Ministry and get over this ticklish issue," the official said.

The Finance Ministry had in August this year issued draft rules that intends to spell out the meaning of `export of taxable services'.

The rules are being framed to bring in more clarity for trade and industry on what constitutes export of services.

The Centre had through the Finance Bill 2004 (now enacted as legislation) empowered itself to make rules for defining export of taxable services, providing exemption to such exports and allowing rebate of tax paid or payable on exported taxable services and their inputs.

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