‘PMO was aware of service tax exemption’

Commerce ministry officials today dismissed the finance ministry’s claim that the decision to exempt exports from service tax was a unilateral one, maintaining that it had been taken in consultation with the Prime Minister’s Office (PMO) and that the PM had known about the proposal all along.

The finance ministry has been saying that it had opposed the move, citing revenue losses, and had made it clear that the decision would not be notified unless the PMO intervened. Ministry officials have pointed out that the decision was premature and unilateral and that it had not been taken into confidence during the announcement.

“Service tax exemption is intended to give some benefit to exporters, who are facing a double whammy in the face of high interest rates and an appreciating currency. The proposal has the full backing of the PMO and it would be wrong to say it is unilateral,” said a commerce ministry official.