Exporters get more sops on service tax, credit

Rupee relief: Enlarged coverage of export schemes

Bowing to exporters’ demands, the Government on Saturday announced a new set of relief measures for exporters in the wake of rapid appreciation of the rupee in recent weeks. On Thursday, the rupee hit 39.36 per dollar, is the strongest since March 1998.

The latest package comes on top of the estimated Rs 1,400- crore financial relief measures, announced in July this year, which included accelerated reimbursement of dues to exporters, reduction in pre-shipment and post-shipment credit and revision in drawback and DEPB rates.

The Finance Ministry had also in mid-September said that refund of service tax would be available in respect of four services, which are not in the nature of “input services” but could be linked to export of goods.

The relief measures announced on Saturday included widening of the coverage as well as extension of the time period of the reduced export credit, refund of service tax on three more services, a provision to pay interest on exchange earners foreign currency (EEFC) accounts and an increase in the revenue ceiling on Vishesh Krishi and Gram Udyog Yojana (VKGUY).

More products are proposed to be covered under VKGUY, which is a scheme to promote export of agricultural and village industry products. For this purpose, the revenue ceiling for 2007-08 has been fixed at Rs 500 crore, up from Rs 200 crore set earlier.

The coverage of the 2 per cent interest subvention, made available in July 2007 to nine specified sectors, has been expanded to include sectors such as solvent extracted de-oiled cake and plastics and linoleum. Also, jute and carpets (under textiles) and processed cashew, coffee and tea (under processed agricultural products) would be eligible for this.

The scheme of reduced interest rates under pre-shipment as well as post-shipment credit would now be applicable up to March 31, 2008 as against the earlier announced December 31, 2007. The three new services for which refund of service tax would be available to exporters are general insurance services, technical testing and analysis agency services and inspection and certification agency services. Official sources said that refund of service tax on general insurance services would lead to revenue loss of Rs 1,000 - 1,200 crore in a financial year to the exchequer.

On EEFC accounts, the Government has now said that such accounts would be interest bearing so long as certain conditions are met. It has allowed banks to determine the interest rate, but stipulated that interest would be permissible on outstanding balances to the extent of $1 million per exporter. The facility of availing interest on EEFC accounts would be valid up to October 31, 2008. Such accounts should be in the form of term deposits with a maturity of up to one year, the RBI has said.