PM approved trade policy: Commerce Ministry

As uncertainty continues over service tax exemption to exports, announced in this year's annual supplement to the Foreign Trade Policy, commerce ministry officials maintain that the measures in this year's policy had been cleared by Prime Minister Manmohan Singh.

Officials in the finance ministry have been maintaining that the commerce ministry had not consulted them regarding the exemption.

A commerce ministry official today said the Foreign Trade Policy had clearance from none other than Prime Minister Manmohan Singh. "No new Foreign Trade Policy could be announced without the consent of the PM. The policy was sent to him two days prior to the public announcement on April 19, which was subsequently approved," the official said, adding, "There were differences but in any case, the policy was approved by the prime minister."

In addition, Parliament, which is in recess, was also intimated about the policy measures, the official added.

Speaking to Business Standard recently, a finance ministry official had expressed surprise over the move saying that the commerce ministry had not intimated them about the export-related services that are taxed and the nexus (the transaction trail for them). "In any case, none of this can be implemented without a notification," the official had said.

The confusion over the proposed exemption of service tax has been further compounded by the lack of clarity on the beneficiaries of the policy move. While the Foreign Trade Policy document specifies that the exemption will be applicable to both exports of goods and services, officials in the Directorate General of Foreign Trade (DGFT) maintain that the exemption will apply only to goods exports.

However, the DGFT has asked the services sector to provide it with a list of services on which service tax is being charged, so that the exemption could also be extended to the sector.