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The Finance Minister, Mr P. Chidambaram, arriving at a post-Budget interactive session with Assocham members in New Delhi on Saturday. Also seen is the Assocham President, Mr M.K. Sanghi (3rd from left). - Kamal Narang

New Delhi , March 5

THE Finance Minister, Mr P. Chidambaram, on Saturday virtually rejected the industry's demand for a review of the decision to withdraw the existing service tax exemption on all payments received in convertible foreign exchange.

The Finance Ministry had recently issued the export of services rules, which spelt out the meaning of `export of services.'

The rules would come into effect from March 15.

Along with this announcement, the Government also said the existing service tax exemption on payments received in foreign exchange would be withdrawn from that date.

"I am not inclined to accept your definition of export of services. We have defined export of services in a manner that is considered to be internationally acceptable and within the scope of the WTO's definition," Mr Chidambaram said. He was responding to the submissions at an Assocham meeting that the withdrawal of the exemption needed a re-look as it would hurt the tourism industry.

Mr Chidambaram asked for the identification of the clauses in the rules that are "incongruent" to international practice and the WTO definition.

After the rules were issued, the Government made it clear that services falling within the meaning of `export of services' would be exempted from service tax. However, all services that were imported into the country would attract service tax.

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