Budget 2016: Commerce Ministry pushes for service tax exemption for exports

To boost waning exports, the Commerce Ministry has suggested that exporters be exempted from payment of service tax in the upcoming Budget.

Exemption from the levy could help in reducing transaction cost and boost exports, an official said.

Currently, exporters pay service tax and then apply for its refund, which is a cumbersome process, according to exporters body FIEO.

"First paying the service tax and then applying for refund increases transaction cost and time. Many times, small exporters do not apply for refund as it takes a lot of documentation and time," Federation of Indian Exports Organisation DG Ajay Sahai said.

He said that in case a full exemption is not possible, at least exemption from service tax may be provided for services such as ECGC premium, clearing house agents charges for exports, terminal handling and service charges for conversion of inward remittances.

India's exports contracted for the 13th month in a row, dipping about 15% in December to $22.2 billion due to a steep decline in engineering and petroleum shipments.

The Budget for 2016-17 will be presented on February 29.