Proposal to define "services" under the Foreign Trade (Development & Regulation) Act, 1992
The Economic Times reports that the Ministry of Commerce would like to bring services trade under the ambit of the Foreign Trade (Development & Regulation) Act, 1992 by including a definition of “services. Discussions have been going on between the ministeries of commerce and finance on this issue.
The proposal, mooted by the commerce ministry, has been vetted by the finance ministry. The finance ministry is, however, not in complete agreement with the commerce ministry’s proposal and has suggested to keep the new definition in line with the provisions laid down in the tax laws as all services are not taxed in the country, sources said.
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The finance ministry, in its comments on the proposed move, has made it clear goods and services cannot be treated on par under the Act. This is especially because all cross-border services are not treated as imports or exports like goods. The practice is also followed internationally. Considering the complexities involved in determining the place of supply of service provision and its evolving nature, like classification of goods for Customs purposes, classification and determination of place of supply of services for international trade in services would have to done as per the provisions laid down by revenue department.
Moreover, there are also no uniform practices in deciding whether a cross-border transaction of service is import or export. This is especially in the case of services like telecom, broadcasting and electronic commerce, the ministry has pointed out. Sources said the proposed changes will have to be carried out keeping in mind that the provisions do no have an implication on taxation of services and service tax collections.
More changes to this statute might also be in the pipeline. There were reports last month (see here) that the government was thinking about a new provision that would enable the imposition of quantitative restrictions on imports in cases of threat to domestic industry. These restrictions might intially extend to four years, with extensions of upto ten years.
