Tax norms for services exports soon

The government is likely to finalise the export rules for services within the next one month. The export rules will clearly define what constitutes a services export for the purposes of taxation.

Revenue department officials said the export rules would attempt to reconcile the provisions of the Foreign Trade Policy, according to which services exports for which payment was received in foreign exchange would be exempt from the purview of the service tax.

"Logically, once the rules are formulated the present exemptions would be withdrawn but a final view would be taken only after consultations. We do not want to contradict the provisions of the Foreign Trade Policy. We will have consultations with the commerce and industry ministry before finalising the rules," an official said.

At present, there is no definition of services exports. Thus, the present exemption available to such exports cannot be enforced.

The finance ministry had last month sought to clear the confusion over the definition of service exports.

The revenue department, in a set of draft rules posted on the ministry's website for public comments in August, had proposed that services provided for goods meant to be exported would be treated as exports.

These services would thus be exempt from the 8 per cent service tax.