Govt mulls another round of export sops

The government is considering another set of measures — the fourth this financial year — to help exporters cope with a rupee that has strengthened 13 per cent since April.

The measures range from scrapping import duty under the Export Promotion Capital Goods (EPCG) scheme to a percentage point increase in duty remission schemes.

These measures are part of a package of nine concessions that were suggested by the commerce ministry around eight weeks ago and are awaiting cabinet approval.

Meanwhile, the finance ministry took the initiative to offer exporters concessions on November 29 last year.

Those measures included lower interest rates on pre- and post-shipment credit, interest payment for delays in reimbursement of terminal excise duty and central sales tax and remission of service tax payments on three services used by exporters.

Among the proposals pending with Cabinet is one to review export sops, which have already been granted, after September 30 this year. In effect, this is an indication of the continuing impact of a strong rupee on Indian exporters.

Between April and November 2007, exports in dollar terms grew at 22.06 per cent against 26.6 per cent in the same period last year. In rupee terms, exports grew at 8.02 per cent, against 31.42 per cent a year ago.

The commerce ministry feels that scrapping duty for imports under the EPCG scheme would encourage technology infusion in export oriented industries.

Exporters are currently allowed to import capital goods under the scheme at a concessional import duty of 5 per cent against the peak duty of around 7.5 per cent.

The commerce ministry has also suggested that rebated state taxes can be adjusted from Plan funds provided by the central government. State levies account for 6 to 7 per cent of the value of Indian exports.

The other proposals include a one-year extension of tax benefits enjoyed by 100 per cent Export Oriented Units and Software Technology Parks of India under Section 10A and 10B of the Income Tax Act, 1961. These benefits are set to expire in March 2009.

Finance Minister P Chidambaram had announced three export relief packages in July, October and November last year. These packages included service tax exemption for 10 services used by exporters against a demand of more than 20 by the commerce ministry.


EXPORT SOPS — IV
(What the commerce ministry proposes)

# Capital goods imports through EPCG scheme should be allowed at zero import duty.

# In-principle approval for adjusting Centre’s allocation to states for reimbursing state taxes to exporters.

# DEPB/duty drawback like duty remission benefits for SEZs, EoUs through tradable scrips at 2 per cent of export value.

# Extension of tax benefits to EoUs, STPIs for one more year from 31/3/2009.

# Review of export sops in September, 2008.