The Hindu Business Line : CII hails restoration of service tax exemption

THE Confederation of Indian Industry (CII) has welcomed the restoration of exemption of service tax on foreign exchange earned by a service provider located in India.

The passage of the Finance Bill, 2003 by Parliament has allowed for the restoration of exemption on service tax on foreign exchange earned by a service provider located in the country.

In a statement, the chamber has said that the exemption will benefit the providers of any taxable service including the export oriented units (EOUs) when services are rendered to foreign clients outside India.

Besides, it is also like to help the EOUs when services are provided for projects of foreign companies in India against payment in foreign exchange. The removal of the exemption would have adversely affected the large number of service providers catering to foreign clients.

The statement points out that another issue which has arisen out of the Finance Bill, 2003 is the proposed levy of a service tax of eight per cent on IT training provided directly by a company or by its franchise. The chamber, in its post-Budget memorandum, had recommended that IT training provided directly by a company or through its franchise be kept out of the purview of service tax.

The statement points out that the sector was going through a lean phase since the downturn of 2001and adds that the imposition of an eight per cent service tax would adversely affect the sector's ability to regain the growth momentum.

The statement adds that while the amendment has not been carried in the enactment of the Finance Bill, 2003, the Finance Minister's statement during the Budget session declaring that the representations made regarding imposing the service tax would be considered before levying the new service tax was a welcome signal.

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