New Delhi, Sept. 17: Exporters will not have to pay taxes on services provided by ports, railways and road transport agencies.

“The government has ordered refund of service tax paid by exporters for transport services,” said a finance ministry statement.

The government had been collecting a 12 per cent service tax and an additional cess of 3 per cent on these services.

Earlier, commerce minister Kamal Nath had promised more incentives in the form of service tax refunds to exporters whose margins have been squeezed because of the rupee rise, which was more than 8 per cent this year.

In July, the finance ministry had provided a financial package of Rs 1,400 crore for exporters.

Exporters already get refund of service tax on input services. The duty drawback scheme also factors in service tax paid on input services used for exporting goods.

The exemption will help exporters save a substantial amount paid as service tax on the movement of consignments on road, rail and through ports. The government hopes this will help meet the export target of $160 billion in 2007-08.

However, exporters are not too happy with the exemption. “The notification hardly meets the bona fide demand for zero tax rate on exports,” said Ganesh Gupta, president of the Federation of Indian Export Organisations (FIEO).

“Besides providing exemption from payment of tax on all services, the notification should be made applicable from the date on which such services were brought under the service tax net,” Gupta added.

FIEO director-general Ajay Sahai said: “Other important services such as commission to foreign agents, professional fee, foreign travelling expenses, bank charges on loans, courier services and participation in trade fares have not been included in the notification.”

Gupta said the government had not agreed to their demand of refund of input tax on non-excisable, non-cenvatable sectors.

Finance ministry officials were not sure about revenue implications of the notification, but said it would provide a major relief to all exporters, especially those who have to move bulk of goods through road, rail and ports.