Service Tax Refund — adding to exporters' woes?

After months of waiting and discussions, the word is out — the Finance Ministry has at last decided to refund service tax paid by exporters on four taxable services rendered by ports, road transport, and railways. The move comes at a time when exporters are reeling under the burden of appreciation of the rupee against the US dollar.

But the big question here is: 'Is this refund enough for the exporters?' I would say no!

Firstly, key services which include commission to foreign agents, professional fee, foreign traveling expenses, bank charges on loans, courier services and participation in trade fairs have not been included in the notification.

Secondly, it was surprising that the notification is far from what was promised on zero tax rate on exports in the Foreign Trade Policy. Refund of input tax on non-excisable, non-cenvatable sectors have been left out of the purview of this exemption.

Thirdly, I get a feeling that this recent notification will only add to the woes of exporters as the service tax would be refunded and not zero-rated or exempted. This would only mean that now exporters will have added paperwork to work upon.

Fourthly, the notification should be made applicable from the date on which such services were brought under the service tax net.

I get a feeling that the refund notification is a cover-up job on the part of the Finance Ministry which wants to skirt the issue totally. So on one hand the authorities have given some relief to the exporters, while on the other, they've added obstacles on the already rocky path of the exporters seeking refunds. Great going Mr Finance Minister!