March 2005

Export of Services Rules, 2005

Amendment to Rule 12(11) of the Central Sales Tax (Registration & Turnover) Rules, 1957, consequent to amendment to sub-section (6) and (8) of section
8 of the CST Act,1956, relating to SEZ units.

Amendment to Second Proviso to Rule 12(1) of the Central Sales Tax (Registration & Turnover) Rules, 1957

Repayment of 9.90% Government Stock, 2005 on April 22, 2005

Press Release : India's External debt for the Quarter end-December 2004

Export of Services Rules, 2005

At present, taxable services provided for which payments are received in convertible foreign exchange are fully exempt from payment of service tax. However, there is no separate provision defining ‘export of services”. There has been a demand to define “export of services” for the purpose of levy of service tax and extend all facilities and relief available to export of goods to export of services.

2.         In budget 2004, amendment had been made in the Finance (No.2) Act, 2004, enabling the Government to make rules for defining export of service and providing exemption from service tax to such exports and rebate of tax paid on input services or duty paid on inputs used in such export of services.

3.         Export of service cannot be defined in the same way as export of goods since unlike goods services are not tangible. Services are treated as export if they are ordered by a person outside the country and delivered outside the country. In other words, the recipient of service who is the principal beneficiary of the service should be outside the country. Taking into account the international practices of treatment of service for the purpose of export of service and other material facts, the Central Government has notified     Export of Services Rules, 2005 on 3rd March, 2005 . These rules shall be effective from 15^th March, 2005 .

4.         The salient features of the rules are as follows:

A)        Four specified taxable services namely real estate consultancy, architect, interior decorator and construction that are provided in relation to an immoveable property are treated as export, if the said immoveable property is located outside India. General Insurance service provided in relation to an immoveable property located outside India is also covered under this category. 

B)        Specified taxable services such as air transport of goods, commercial coaching, dry cleaning, which involve physical performance, are treated as export if such service is partly or wholly performed outside India .

C)        Remaining taxable services such as management consultancy, telephone, banking and other financial services, are treated as export subject to the following criterion:

·   Service provided to an industrial or commercial establishment, which is located outside India , for use in commerce or industry, shall be treated as export. However, if such industrial or commercial establishment also has an industrial or commercial establishment or office in India, then in such cases the services shall be considered as export only if,-

(i)    the order for provision of service is made from outside India ;

(ii)    such services are delivered outside India ; and

(iii)    payment for such service is received in convertible foreign
exchange.

·   Taxable services provided to a recipient and used other than in industry or commerce shall be treated as export only if the recipient is outside India at the time when such services are received.

5.         Taxable services are allowed to be exported without payment of service tax. If services are exported, after payment of service tax, the rebate of service tax paid on such taxable services would be available. Provisions for rebate of service tax paid on input services and excise duty paid on input goods have also been made.

6.         Exemption from service tax on taxable services for which payments are received in convertible foreign exchange (notification No. 21/2003-Service Tax dated 20.11.2003) is rescinded. Consequential changes have also been made in the CENVAT Credit rules, 2004.

These changes shall be effective from 15^th March, 2005 .  

Amendment to Rule 12(11) of the Central Sales Tax (Registration & Turnover) Rules, 1957, consequent to amendment to sub-section (6) and (8) of section 8 of the CST Act,1956, relating to SEZ units.

It is proposed to amend Rule 12(11) of the Central Sales Tax (Registration & Turnover) Rules, 1957, consequent to amendment to sub-sections (6) and (8) of section 8 of the Central Sales Tax Act, 1956 providing for non-liability to CST in respect of purchases made by units in a Special Economic Zone(SEZ) for the purpose of setting up, operations and maintenance of a unit or by a developer for the purpose of development, operations and maintenance of such zones.  In order to operationalize the above-mentioned exemptions, it is proposed to amend the existing Form I also.  Comments/views on the draft amendment to Rule 12(11) and Form I( copy enclosed), if any, may be sent not later than 24^th March 2005 at the following address.

L.K. Gupta,
Director (Sales Tax),
Room No. 225-C
Ministry of Finance,
Department of Revenue,
North Block,

New Delhi.-110001  

Telephone: 23092878
FAX:           23092741
E-mail:       lkg_2020@yahoo.com

Amendment to Second Proviso to Rule 12(1) of the Central Sales Tax (Registration & Turnover) Rules, 1957

At present the second proviso to Rule 12(1) provides for furnishing of C’ Form in respect of inter-state transactions made in a financial year.  It is proposed to amend the above rule so as to provide that one  ‘C’ Form shall contain details of inter-state sales between the same dealers made in a quarter.  Thus, one ‘C’ Form would be required for each quarter.   The draft amendment is enclosed.  Comments/views on the draft amendment to Rule 12(1), if any, may be sent not later than 24^th March 2005 at the following address.

L.K. Gupta,
Director (Sales Tax),
Room No. 225-C
Ministry of Finance,
Department of Revenue,
North Block,
New Delhi.-110001

Telephone: 23092878
FAX:           23092741
E-mail:       lkg_2020@yahoo.com

Repayment of 9.90% Government Stock, 2005 on April 22, 2005

  The outstanding balance of 9.90 per cent Government Stock, 2005 is repayable at par on April
  22, 2005 and no interest will accrue thereon from the said date.            

  In the event of a holiday being declared on April 22, 2005 by any State Government under the
  Negotiable Instruments Act, 1881, the Loan will be repaid by the paying offices in that State on
  the previous working day.

 To facilitate repayment of the Government Stock on the due date, holders may tender the securities
 duly discharged at the Public Debt Offices, Treasuries/Sub-Treasuries and branches of State Bank
 of India and its Associate Banks (at which they are enfaced / as also registered for payment of
  interest) 20 days in advance of the due date for repayment.  

  Full details of the procedure for receiving the discharge value may be obtained from any of the
  aforesaid paying offices

 Government of India
 Ministry of Finance
 Department of Economic Affairs
 New Delhi-110 001  

 Dated the March 17, 2005 .

India ’s External Debt for the quarter ended December 2004

India ’s external debt stock was US $ 120.9 billion as at the end of December 2004, which was higher by US$ 7.3 billion than that of US $ 113.6 billion as on September 30, 2004 (Table 1). A large part of the increase, about 57 percent or US $ 4.1 billion, is explained by the valuation change arising out of depreciation of the US dollar against other major international currencies.