Joining the chorus for tax benefits to be incorporated in the Exim Policy that will be announced by the Union Commerce Ministry on April 2, the pharmaceutical exporters in the country are pressing for relief in service tax.

In its memorandum to the Union Commerce Minister Kamal Nath, the Pharmaceutical Export Promotion Council (Pharmexcil) chairman Dinesh Modi has pleaded for relief in service tax to the pharma exporters to make Indian goods truly competitive in the international market. "In order to reduce transaction costs to make Indian goods (exported by merchant exporters) truly competitive in the international market, rebate of service tax paid on all taxable services availed by them (both services received and availed) should also be granted to merchant exporters", reads the memorandum. The Pharmexcil has sought parity with manufacturer exporters in this regard as they are entitled to avail CENVAT credit.

The exporters have demanded to the government to amend the Rule 18 of the Central Excise Rules 2002, to grant rebate of service tax on the input services used in the manufacture of exempted goods so exported by manufacturer exporters.

Urging the government to stick to the fundamental principle that duties and levies should not be exported, the Pharmexcil asked the government to extend the export of services benefit to export of any services. It demanded to amend the ESR to provide rebate of service tax paid on input services availed for export of any services on the same lines of the rebate now available for input services of export of taxable services and the rebate of duty as available on the inputs used for export of any (exempted) goods. Presently ESR covers only export of taxable services.

Demanding to dispense with the condition of delivery of service outside India under ESR, the pharma exporters have pleaded that in the context of many services like commission agent, management consultants, the service could be provided through telephone, internet or other similar modes where it may be practically difficult to have documentation or proof of evidence for delivery of service unlike export of goods.

In this regard, the Pharmexcil urged the government to come out with a detailed guidelines as to what would constitute delivery of service vis a vis specific service categories, more particularly those specified under Rule 3 (1) (iii) of ESR. As regards user of service outside India, it should be provided that a declaration obtained by a service provider from a service recipient shall be regarded as a sufficient compliance of the condition under ESR.

As for import of services, the Pharmexcil has demanded that the Act should be amended to specifically provide that only services received and consumed in India would be liable to service tax in case of import of services. Till then, CBEC should specifically clarify that services provided and consumed outside the territorial jurisdiction of India shall not be liable to service tax in terms of section 66A of the Act and Rules framed there under.

Apart from that, provision for avoidance of double taxation ought to be introduced meaning that if a service is taxed in a foreign jurisdiction on the basis that the service is provided in that jurisdiction and is also held to be liable to service tax in India would be reduced by VAT/GST paid in the concerned foreign jurisdiction based on the proof provided by the service provider of the same having been taxed in India, the Pharmexcil memorandum said.