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Govt to pay 70% service tax claim in a day
February, 21st 2009

More time for fulfilling export obligations also likely.

The Centre is exploring a series of measures to ease the procedural difficulties faced by exporters. The steps, to be taken before the model code of conduct for the coming general elections is enforced, will not involve any additional spending.

The first measure, likely through a notification in a week, will allow exporters get 70 per cent of their service tax claims immediately on application, while the rest will be cleared within a month, government sources have told Business Standard.

The Department of Revenue is likely to issue a notification in this regard next week, said the official. Service tax is refunded on nearly 20 services used by exporters to manufacture goods for overseas sales.

At present, an exporter has to prove that the services were used while exporting a product. Exporters say they have not benefited from the scheme because of the complex reimbursement procedure.

The paper work involved in the process is huge and hardly have any exporters benefited, said GK Gupta, managing director, Vijay Silk House Mumbai.

According to a recent survey of 52 companies by the Federation of Indian Export Organisations (FIEO), a government-promoted industry body, only one company could get the tax refunded.

The problem is that exporters have to prove that the service was used while exporting the product. This is a very complex procedure and tax authorities use their discretion to determine if a service tax refund application is complete or not, said a Delhi-based trade expert.

The revenue department is also expected to notify other measures to simplify procedures for exporters. Many more notifications are expected up to the date when the election code of conduct is enforced, said the official.

These notifications are likely to include more time for fulfilling export obligations. Exporters import inputs and machinery at concessional duty rates. However, they have to commit that goods of a certain value will be exported within a certain period of time. But due to the ongoing slowdown, many exporters are not being able to fulfil their obligations. An extension will ensure that such exporters are not penalised.

The measures were discussed at a meeting between exporters and the government on January 21. The discussions were held in the backdrop of a dip in exports for three consecutive months up to December 2008.

Finance Minister Pranab Mukherjee, while presenting the Interim Budget, had extended a scheme that provides interest subsidy on export credit up to September 2009.

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