FM fine tunes service export norms
There are now two conditions to be satisfied for a service to qualify as export. The first being that you must receive foreign exchange and the second being practical conditions which vary for each type of service, viz: the service should be partly or fully performed outside India; or the service recipient is located outside India; or the immovable property in relation to which the service is rendered is outside India. Since the introduction of the Export of Service Rules five years ago, service exporters have been caught up in ambiguities. The rules became increasingly complex — we moved from a scenario which required that a service needed to be delivered and used outside India, to one that called for services to be provided from India and used outside. The rules were ambiguous on aspects like the meaning of the terms 'use of service in India, delivery of service outside India and services to be provided from India'. Despite several efforts to simplify these, there were many controversies on their interpretation — such as whether use should be determined based on location of clients or the location of business operation for in which the service is being consumed or the physical place of performance of such service. The CBEC issued a clarification last February that the condition of 'provided from India' and 'used outside India' should be simplistically interpreted to mean the location where the benefit of a service accrues — which is driven by the location of the client and his business. Though there seemed to be some hope with this circular, it was not very long lived as the New Delhi Tribunal rejected a stay application made by Microsoft questioning the legal validity of the export circular. The FM lays to rest all these questions by deleting the contentious export condition requiring a service to be provided from India and used outside India from the Export Rules altogether. The FM satisfied the Indian service exporter. The procedures for claiming refund of accumulated input taxes paid on exported services had resulted in litigations. But the retrospective amendment made to a notification dating back to March 14, 2004, ensures that there is no discrimination while allowing refund on input taxes paid on goods and services; and two-different yardsticks are not used by the Revenue authorities while allowing credit on services and in allowing refunds for the same. This Finance Bill lays to rest what constitutes export, with almost a sure ticket to administration of refund cheques to service exporters. Times of India, New Delhi, 28-02-2010
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