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Last updated: 17 Feb, 2015  

Ajay Sahai THMB Exporters wish for tax sops in Union Budget-2015

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Saurabh Gupta | 17 Feb, 2015
At a time when global competition is becoming serious and orders are being lost on razor thin margins the exporters of the country are wishing for some rebate in various taxes including upcoming GST, service tax and on the direct tax front in the forthcoming Union Budget 2015-16, said an apex exporters body, Federation of Indian Export organization (FIEO).

Speaking to SME Times about their wish-list for upcoming Union Budget-2015, the Director General, FIEO, Ajay Sahay said, "We are looking at a road map for GST, which may come in 2016 or 2017. But we want that at least a milestone should be decided for now and we should move towards those rates, which we want to achieve. And from export sector we want that all the state taxes may be brought under the state GST so that there is complete rebating for exports otherwise at the moment the draft, which have been circulated, does not cover all the taxes. for example the electricity duty, the sales tax on diesel and petroleum products these are not covered under the state GST."

FIEO welcomes introduction of GST bill ushering in an era of simplification and transparency in tax regime besides providing zero rebating of exports even at States level.

Secondly on service tax, he said, "We want that lot of service taxes, which exporters takes in the form of banding of its product or testing of its product abroad they are now charged under the reverse charge mechanism, which is not rebated also to the exporters. So we want that for those activities there should be exemptions for exports. Otherwise it will hit at the product. People will not be going for testing and also the branding is very much required."

He said that exports should be exempted from Service Tax. First paying the Service Tax and then applying for refund of it increases transaction cost and time. Many times small exporters do not apply for refund as it takes lot of documentation and time.

On the direct tax front, Sahay said, "We are looking at one is Dividend Distribution Tax (DDT) and Minimum Alternate Tax (MAT) for the Special Economic Zones (SEZs) even if it is not a zero rating for the DDT MAT, at least there should be brought down for the SEZ units."

"Secondly there is invent linked allowances, which have been given for large companies (those who are investing to Rs 100 crore or more). We think that it should be brought down so as to encourage micro small and medium enterprise (MSME) units also." "So the limit should be brought down to rs. 1 crore," he added.

The 3 percent interest subvention scheme which was available to certain specific sectors like Handicrafts, Handlooms, Carpets, Readymade Garments, Processed Agricultural Products, Sports Goods and Toys, 235 sub-sectors of engineering sectors and some items covered under Chapter 63 of ITC (HS) has  expired on 31st March, 2014.

Sahay said that the interest subvention should be announced because the cost of credit in India is still very high. "We are now competing with the countries where the rate is high and the whole cycle of exports is taking much longer time. Because the liquidity problem is everywhere, the cost of credit is very high and it take longer period to get it back, so on both the front exports are getting a hit. That is some thing we have to be very careful."

The objective of the scheme was to provide export credit at rates lower than the normal lending rates. Since there is no change in the interest rates, the Scheme should continue for a further period of least three years.

Further, there should not be any differentiation among the sectors and type of exporters. Merchant exporters need as much credit as manufacturer exporter and both are earning foreign exchange for the country. It is suggested that the Interest Subvention Scheme should cover all the sectors including Service Sector and merchant exporters also.

In their detailed wish-list, FIEO also urged for bringing Export under Priority Sector Lending, marketing support fund, induction of safe Harbour Rules for contract manufacturing, incentivising manufacturing firms in exports and excise duty should be exempted on purchase of capital goods from indigenous manufacturers under EPCG Scheme.

DG, FIEO told SME Times, "Our president have met Finance Minister and officials and they were sympathetic but they have lot of other constrains by which they are working."

"So let us see what better comes out from this budget," he ended. 
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