Ministry of Finance has clarified that there is differences between Ministry of Commerce and Ministry of Finance on the issue of Export of Services and Exemption related thereto.

Copy of Press Release below is reproduced below: -

CLARIFICATION ON SERVICE TAX EXEMPTION ON EXPORTS

Dated: - 11-05-2007

The Annual supplement to the Foreign Trade Policy released in April, 2007 had stated that service tax on exports shall be exempted. Various newspapers have been reporting that differences persist between the Finance and Commerce ministries on this issue.

On the issue concerning rebate or refund of service tax paid on various input services used for goods or services exported, it is hereby clarified that there are no differences between the Finance and Commerce Ministries and this decision was taken with the approval of the Commerce Minister, the Finance Minister and the Prime Minister. The taxes paid on inputs or input services used for manufacture of export goods or for providing export services are already being neutralized under rebate, refund and drawback schemes. However modalities for refund/rebate service tax on certain services, which are not input services, but are related to goods or services exported from India, and to neutralize service tax on services received/rendered abroad are being worked out in consultation with the Department of Commerce.

Service tax exemption on exports confirmed: input taxes neutralised and refund modalities for related non-input services under consultation. The Ministries of Finance and Commerce confirm unified policy that taxes on inputs and input services used for export goods or services are neutralised under rebate, refund and drawback schemes, and that modalities are being developed with the Department of Commerce to refund or rebate service tax on certain related non-input services and on services received from or rendered abroad.