The government ushered in the era of a tax on all services, except for those on a negative list, brushing aside requests from some quarters for a postponement. Obviously, the government felt enough time had been given already, with the concept paper on the subject put out a few months before, major legislative proposals presented with the Budget and essential notifications issued 10 days earlier. Even so, some last-minute doubts surfaced and the government came out with a circular and notifications to clear these.
The major anxiety of exporters was about the service tax exemption on commission to their agents abroad. On June 20, the government superseded (with effect from July 1) its notification of July 7, 2009 (that had allowed exemption on services of goods transport agencies and commission agents abroad) and granted exemption only on services of goods transport agencies for transport of goods to ports or airports. Exporters were left wondering whether they would be required to pay service tax on the amounts they remitted to the commission agents abroad. Their anxieties were set at rest on June 29, when the joint secretary (TRU)s DO letter No. 334/1/2012-TRU informed that these services, of commission agents to exporters on the existing lines, had been validated by the issue of Notification No. 42/2012-ST.
The other anxiety of exporters related to refunds of tax on specified services that they use in the course of exports. The existing notification No. 52/2011-ST dated December 30, 2011, had to be revised in accordance with the new regime. The joint secretarys letter informed this had been done by way of a new notification, No. 41/2012-ST dated June 29, issued under the revised Section 93A of the Finance Act, 1994. There were some doubts about the levy of education cess and secondary higher education cess. The joint secretarys letter clarified the legal position and said the matter had been settled with the Removal of Difficulties Order No. 2/2012 dated June 29. The letter also clarified that notification No. 11/2005-ST dated April 19, 2005, had not been rescinded to enable sanction of pending rebates and that it would, however, automatically cease to have effect for exports on or after July 1, as the Export of Services Rules, 2005, would stand superseded from the said date.
Overall, the Central Board of Excise and Customs (CBEC) went about the task of implementing the new regime with sufficient care. An elaborate educational guide (with further improvisation over the draft guidance papers released at the time of the Budget) has been put up on the CBEC website. Seminars have been held at various centres to help tax payers understand the new regime. A video of the seminar held in Chennai has been made available on the website. CBEC has advised its staff to refer any complex issues to the Board for examination, rather than precipitate action at the early stages of implementation, unless revenue is at immediate stake.
What CBEC needs to do now is update all the provisions of the new regime on its website. The updated versions of the relevant provisions of the Finance Act, 1994, and the Rules will help the taxpayers immensely.