New norms on exports to hit tourism

Services by hotels, tourist resorts, hospitals and education institutions that are being paid for by a foreign national in foreign exchange will no longer be treated as exports and will be liable to pay a 10 per cent service tax from March 15, 2005.

In addition, container freight stations and inland container depots will also come under the ambit of service tax.

OP Garg, president, Federation of Indian Export Organisation said the new rules would deal a severe blow to service sector exports as it would exclude all services under Mode 2 of the WTO classification and make them less competitive.

Finance ministry officials, however, clarified that the change in definition of service exports was done in accordance with international practices, prevalent in countries like the USA, UK and Australia.

All the 72 services under the service tax net would have to subscribe to the new export rules, officials said adding the rules would also cover the new services announced in the Budget.