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New service tax refund mechanism on the anvil
February, 09th 2011

Exporters' service tax refund woes could get squarely addressed in the upcoming Budget.

The Centre is likely to soon introduce the concept of an all-industry service tax rate' on the lines of all-industry rate of duty drawback'.

Besides expediting refund of service tax on output services, the introduction of an all-industry service tax rate would also bring about reduction in transaction cost to the tune of about Rs 362 crore, according to Mr Jyotiraditya Scindia, Minister of State for Commerce and Industry.

This is one of the 44 issues (across seven line ministries) that the Task Force on Transaction Cost in exports has identified for action. Of the 44 identified issues, there is now consensus among ministries to implement 32 of these issues.

Of these, 21 issues have been implemented and another two (all industry service tax rate and provision of single bond for customs) are likely to be implemented in a couple of months, Mr Scindia said.

This is the first time in the history of Government I believe we are coming out along with the report with measures that are announced as implemented. It is expected that implementation of the 23 measures is likely to mitigate the transaction cost to the tune of Rs 2,100 crore in perpetuity for the export sector across the country, Mr Scindia said soon after the release of the Task Force report by the Union Finance Minister, Mr Pranab Mukherjee.

Single bond

The task force was established in October 2009 under the guidance of Mr Scindia to identify the key bottlenecks and suggest measures to improve efficiency of the processes in the entire export value chain.

It analysed the entire export process, from factory gate to free on board (FOB) across six verticals agriculture, chemicals, readymade garments, leather, engineering and textiles.

The 21 recommendations of the report that have been implemented with immediate effect include 24x7 customs clearance to be available at eight customs ports, availability of plant quarantine services round the clock at international airports in Chennai and Mumbai and facility for exporters to file EPCG application and advance authorisation offline.

The Government is also now looking to implement a concept of a single bond to obtain multiple authorisations from Customs.

This is expected to reduce paper work both at customs and organisation level and lead to reduction in transaction cost to the tune of about Rs 440 crore, Mr Scindia said.

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