Service Tax on Export of Services

Service Tax on Export of Services

The first notification relating to export can be traced back to Notification No.2/99 dated 28-02-1999 which means that since July 1, 1994 up to 28-02-1999 the concept of Export of Services was absent and consequently earnings in foreign exchange suffered service tax in contrast to the exporters of goods who enjoyed exemption.

The said notification was simple and provided exemption to specified services for which payments were made in convertible foreign exchange. This notification was rescinded and replaced by a new notification no.6/99 dated 09-04-1999. The only change was the addition of a proviso.

The proviso withdrew the exemption granted if the proceeds received in India in convertible foreign exchange was repatriated from or sent outside India. This notification survived till February 28, 2003. With effect from March 1, 2003 vide Notification No.2/2003 the Government exploded a nuclear device on the exporters of services by rescinding (withdrawing) the notification.

Acting on the Tsunami of representations the Government issued circular no.56/5/2003-ST dated 25-4-2003 clarifying that “Service tax is destination based consumption tax and it is not on export of services. Export of Services would continue to remain tax free even after withdrawal of Notification no.6/99 dated 9-4-99

Leave a Reply

Your email address will not be published. Required fields are marked *

12 − two =