Exports' definition needs a change

The revenue department has sought modifications in the Foreign Trade Policy dealing with the definition of service exports. The definition was coming in the way of notifying the rules on taxable service exports.

The Foreign Trade Policy, announced on August 31 this year, defined service exports as those where "payments for such services is received in free foreign exchange".

"The revenue department is of the view that service exports can be defined through foreign exchange earnings. It said that there may be instances where a foreigner comes to India to get a service and pays for it in foreign currency, but since the service has been extended within Indian shores it cannot be termed as an export," an official said.

"Since the revenue department has decided not to define service exports based on whether they earn foreign exchange or Indian rupee, notifying the rules in the present form could be in conflict with the norms of the Foreign Trade Policy," the official said.

Revenue Secretary KM Chandrasekhar had raised the issue last week with Commerce Secretary SN Menon.

Officials said the rules were likely to be notified by the end of this month.

The ministry has already formulated the draft rules on service exports, according to which taxable service exports have been identified under four categories.

The first refers to services which are linked to the export of goods, such as trucks and cargo handling services at ports.

The second refers to services provided in relation to an immovable property situated outside India, such as services of an architect, interior decorator or real estate consultant.

The third category refers to services performed outside India, such as airport services or air transport.

The fourth category refers to services where the recipient is outside the country, such as telephone, pager, telex services, etc.