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Service tax refunds to exporters likely to be made easier, quicker
February, 21st 2009

Exporters will soon be able to get a large part of the service tax refunds due to them. Not only is the finance ministry set to simplify rules for applications for refunds, which will bring down the number of rejections, it is also planning to direct the central excise and service tax authorities to disburse 75% of the pending dues at once and clear the remaining within 30 days, a government official said.

The government is also considering doing away with the need to carry out various verifications, including proofs of exports by the field staff, and instead accept certificates given by chartered accountants on the same. The government levies a 12% tax on services.

This will be part of the series of steps being taken by the government for procedural simplification that would bring down cost of operations for exporters. With exports from the country taking a beating due to the global downturn, the government is exploring various ways to help the sector. The proposed move would release cash in the hands of exporters at a time when they are facing a financial crunch and payment problems from buyers.

According to a government official, the total amount pending to exporters in terms of service tax refunds is over Rs 2,000 crore. The finance ministry started allowing tax refunds on select services from October 2007. It now allows refunds on 19 services, including banking and other financial services, port services, transport of goods by road and railways, general insurance, technical testing & analysis, storage & warehousing, business exhibition services and specialised cleaning services.

However, exporters have been refunded very little of the amount as the rules for making claims are stringent. One of the rules slowing down refunds is the requirement of proof of realisation of export proceeds before making claims. Often there is a time lag between shipment sent and payment realised and hence there is an unwarranted delay.

Excise and service tax officials also ask exporters to prove that the services for which they are seeking refunds have been explicitly used for export activities. Often, this is difficult to prove.

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