The Federation of Indian Export Organisations (FIEO) has sought exclusion of payments relating to exports -- such as commissions given to foreign agents -- from Tax Deducted at Source (TDS) in its memo to the Finance Ministry on Budget 2012-13.
“With the landmark Vodafone judgement of the Supreme Court, the applicability of Section 195 of the Income Tax (I-T) Act on payments made in the course of exports as foreign agency commissions / royalties / offshore and professional services would require to be revisited,” Mr M Rafeeque Ahmed, President, FIEO, said.
This is because in these cases “the situs (place) of service provided is outside the jurisdiction of tax authorities,” he said, adding that, “The Budget should exclude such transactions from TDS and this is one of our main demands this time.”
Over a 1,000 mid-sized export companies, mostly in Tamil Nadu, had got notices from the I-T Department for non-payment of TDS from Rs 10 crore and above, FIEO officials said.
Following this, exporters had moved different courts across the country. In one of the cases, the Income Tax Appellate Tribunal in Hyderabad had ruled in favour of the exporters, the FIEO sources said.
Mr Ahmed said the Central Board of Direct Taxes could also issue a clarification with respect to the said provision in the I-T Act to resolve the issue.
TAX DEDUCTION ON INVESTMENT
Among other demands, exporters have also sought 100 per cent tax deduction on investment ploughed back in the business. This would help in creation of additional capacities and adoption of modern technology to augment production and increase efficiency.
In this regard, they cited the Direct Taxes Code proposal for investment-linked tax benefits.
FIEO also sought inclusion in the negative list of services (those exempt from the purview of service tax) ECGC premium, currency conversion, commission made to foreign agents as well as transport of export goods from place of removal to Inland Container Depot or from ICD to ports.