Economy

Refund of Service Tax paid by Exporters in India

budget

You can’t stop marvelling at the lack of speed in which the Indian Finance Ministry operates. It has taken 5 Years, change of a finance minister, a global recession for the finance ministry in India to start to “look” into this issue. About 5 years back Mr.P.Chidambaram as then Finance Minister cancelled the exemption given to Exporters from paying “Service Tax” on input services (which amounts at current rate @12.36%) that were rendered towards manufacturing/rendering an item/service that will get exported out of the country. The idea being you can only export a service/item not the tax of the originating country with it and to prevent India from becoming non-competitive compared to its neighbours. Instead of the exemption the Hon’ble minister announced Exporters can claim a refund (which in India means pleasing the bureaucracy & adding infinite delays) for the service tax they will pay, this the minister said was to prevent leakages and misuse of the benefit. In India “Refunds” or for that matter any policy announcements (other than the written law) are mere intentions and are like “Poll” promises – they will always be kept as a promise by then finance minister and his successors. Keeping up this tradition, there has been no clear announcement or notification on the procedure and the forms to be used for this refund claim. For last several years at my company, we have asked every Service Tax & Excise Tax official we have met for the procedure we need to follow to get the refund, every one has said anything but a consistent answer.

Hence, I was surprised Today to see some movement on this with this article in Economic Times Newspaper – “Faster Service Tax refunds on cards”. With today’s budget turning out to be a disappointment (it read more like UPA government poll propaganda) for Indian Inc. and Exporters in particular at least if the FinMin can do this refund notification quickly, it will give us some relief in these testing times.