The Hindu : Tamil Nadu News : Exporters' plea to Centre on service tax

Online edition of India's National Newspaper
Monday, Jul 18, 2005

Tamil Nadu

Tamil Nadu - Others

Exporters' plea to Centre on service tax

Staff Reporter

KARUR: The Karur Textile Manufacturer Exporters Association has urged the Centre to withdraw the notification re-imposing service tax on export cargo freight rates, stating that the withdrawal of the benefit so far enjoyed by them would hit the small and medium exporters hard.

The Centre, by way of Notification No.28/2005 had withdrawn the exemption enjoyed by the Air Cargo Operators from June 16, 2005. As a result, an additional burden of 10.2 per cent service tax would be levied on export cargo freight rates. Further, the tax would have to be paid in Indian rupees.

Many export their goods on Cost Insurance Freight (CIF) based on the request of the buyers. The exporters collect the freight from the buyers in foreign currency and make the payment to the airlines in India in rupees. "Since that is foreign-inward remittance, why should service tax be levied on freight rates that are part of export price in foreign currency? We do not find any justification in such means,'' said the president of the Association, V. Kumar.

Due to stiff competition in the global market, fluctuations in cost of raw-materials and exchange rates, and increasing fuel cost, exporters were already working with a narrow margin. Any negative policy of the Union Government would be a blow to the export units, according to the Association secretary, S. Susindran.

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