FIEO Meets Finance Minister Arun Jaitley, Suggests Exemption From Taxes

Emphasizing on the need to reduce the tax burden on the export sector in India, Federation of Indian Export Organisations (FIEO) discussed the recently passed Goods and Services Tax (GST) and reintroduction of interest subvention scheme in its meeting with Finance Minister Arun Jaitley on Tuesday.

“We would suggest that all the incidence of Indirect Taxes at the State levy including electricity duty, sales tax on diesel and petroleum, turnover tax, etc. should be brought within the rebating mechanism so that exports are zero rebated at a time when global competition is becoming serious and orders are being lost on razor thin margins,” said M Rafeeque Ahmed, president of the apex body of exporters.

Another recommendation made by the association is that exporters should be exempted from all indirect taxes especially the removal of the National Calamity Contingent Duty (NCCD) on crude oil, which is levied at Rs 50 per tonne.

“Petroleum product exports constitute more than 19% of India’s total exports. Removal of this duty on imports under advance licenses, which only earns the Government a sum of less than Rs 100 crore per annum, will lead to improving the competitiveness of Indian exports. Petroleum refining is a business based on very thin margin. NCCD imposes additional cost to the industry which is not rebated. At a time, when even exports of petroleum products have witnessed a decline in recent months, there is a need to take all necessary measures to support export of petroleum products,” added Ahmed.

The association also suggested that exporters should also be exempted from excise duty on purchase of capital goods under the current Export Promotion Capital Goods (EPCG) scheme.

Ahmed in its letter has also stated that exporters should not be liable to pay service tax. The body has stated that if overall exemption from service tax adversely impacts the revenues earned from taxes, then exporters should not be subjected to pay service tax on services taken from ECGC Premium, container freight stations, Clearing House Agents charges, terminal handling charges for exports, bank charges, services charges for conversion of inward remittances as well as courier charges for documents and commercial shipments.

“The government should also look into the matter of delay in payment of duty drawback. It has been experienced that payment of duty drawback and central excise rebate claims are delayed during the last quarter of the Financial Year. Some technical omission is subsequently shown to justify the delay. Moreover, interest is also not paid on such delayed legitimate payments. The delay in the reimbursement of drawback claims causes a lot of problems for the exporters in carrying on with their new export orders. It is requested that an urgent and permanent solution of this problem may be found to avoid blockage of exporters working funds and consequent affect to country’s exports,” noted Ahmed.

Apart from exemption from service tax and other such suggestions, FIEO has urged the government to re-introduce interest subvention scheme that expired on March 31, 2014. The government had provided 3% interest subvention on export credit for sectors such as handicrafts, handlooms, carpets, readymade garments, processed agricultural products, sports goods and toys along with 235 sub-sectors of engineering sectors. The association has suggested that the scheme should not just be confined to certain sectors, but should cover the entire export community including the services sector and merchant export sector.

“We have also suggested the government to augment the flow of credit by bringing exports under Priority Sector (5% of total lending within 40% norms for Priority sector). The availability of capital and cost of capital is of paramount importance. The share of export credit in net bank credit has come down from over 9% to 3.5% in December, 2013 as against RBI desired level of 12%. Banks are reluctant to provide credit to export sector,” stated Ahmed.

In its meeting with Finance Minister Jaitley, the association has also recommended the government to provide funds for marketing and branding exercise of Indian goods that are exported overseas.

“An Export Development Fund (EDF), with focus on marketing research and innovative tools of marketing, would help not only the existing exporters but would attract new entrepreneurs in the field of exports. The corpus of the fund should be at least 1% of preceding year’s exports. The detailed guideline for operation of the EDF can be worked out by the Department of Commerce in consultation with stakeholders,” averred Ahmed.