New system may cut export customs clearance to few hours: Chidambaram

Finance Minister P Chidambaram today expressed hope that the time taken for customs clearance of export cargo will come down to a few hours after implementing a risk management system.


"I sincerely hope that with the introduction of RMS in exports, the dwell time which now ranges from 1.6 days to 3.68 days will be brought down to a few hours," Chidambaram said after launching the all-India Risk Management System (RMS) for exports.
India started using the RMS for imports in December 2005 and it has helped to bring in additional revenue of Rs 2,211 crore, Chidambaram added. It has also reduced the dwell time, or the duration for which cargo remains in transit storage while awaiting clearance, for incoming shipments.

"The revenue department claims that the dwell time for imports has come down drastically after launch of RMS in imports. Likewise, RMS in exports is intended to bring down the dwell time so that the cargo meant for exports moves up quickly, leaves the shores of India towards its ultimate destination," Chidambaram said.

The time currently taken for customs clearance of export cargo in Mumbai is 1.6 days, while at the Inland Container Depot in Delhi it is 3.68 days.

Chidambaram said the RMS is based on trust and is part of international co-operation efforts on trade-related issues. The facility will enable low-risk consignments to be cleared based on self-assessment declarations by exporters.

By expediting the clearance of compliant export cargo, the system will contribute to lower dwell time, besides reducing transaction costs and making businesses internationally competitive.

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Import duty on power equipment may not make much difference for domestic manufacturers

COIMBATORE: The government's decision to impose a 21% import duty on power equipment may not mean much for local manufacturers such as Bharat Heavy Electricals (BHEL). With the order inflow presenting a bigger challenge and the threat of Chinese imports fading due to the sharp depreciation of the rupee against the yuan, local makers have more serious issues to contend with than worry about cheap imports, industry observers said.

"Import duty on BTG (boiler turbine generator used in power plants) equipment is a non-issue now for BHEL and L&T (Larsen&Toubro)," analysts at Nomura Equity Research said. The government has approved a 21% import duty on power equipment (comprising 5% basic customs duty, 12% counter-veiling duty and 4% special additional duty). Earlier, equipment for mega power projects (higher than 1000 MW) were exempt from the duty, while coal fired projects of less than 1000 MW attracted a 5% customs duty.

"The order inflow in itself is a much bigger problem for the sector right now and even for the next 2-3 years," analysts said. "The sector first needs to come out of these issues and then look for other catalysts." Moreover, competition from Chinese manufacturers is already on the decline due to the sharp depreciation of the rupee. The rupee has declined 26% against the yuan in the last one year.

While public-sector orders as well as expected UMPP (ultra mega power projects) orders have a mandatory domestic manufacturing clause, the private sector would not bring major orders, observers said. The proposed duty could be prospective in nature and will not affect the already-placed orders, they said.

But even a retrospective implementation of the import duty is unlikely to benefit major players such as BHEL meaningfully since most of these projects have reached an advanced stage of construction. "Project developers are unlikely to cancel their orders to Chinese vendors at this stage," observers said.

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Govt notifies new duty drawback rates for 4000 export items‎

Exporters will get lower tax refunds from October 1, as the Union finance ministry on Friday announced a new Duty Drawback Scheme, ending the 14-year-old Duty Entitlement Passbook Scheme (DEPB).

To provide a smooth transition from the popular tax credit scheme to the drawback scheme, the ministry said the drawback rate would have a floor rate of 5.5 per cent of the value of export consignments for most items.

The decision, taken after years of dallying, to neutralise the input tax paid on duties, may primarily affect companies in the engineering sector, including automobiles and the auto component industry, chemicals, textiles, pharmaceuticals and the marine sector, which were major exporters, getting the benefit of the DEPB scheme.

The finance ministry has softened the blow, as the new duty drawback rates will mean a moderate reduction of one to three per cent in the existing DEPB rates. The lower reduction has been provided only for the current financial year and the rates may be rationalised next year.

“Since the DEPB scheme will not continue beyond September 30, it has been decided to provide a smooth transition for these items, while incorporating these in the drawback schedule. As a transitory arrangement, these items will suffer a modest reduction in the existing DEPB rates, to the extent of one per cent to three per cent, which represents the ad hoc rates of DEPB introduced in 2007,” Finance Secretary R S Gujral told a press conference.

There are 2,130 items on the DEPB list, of which 1,030 are also covered in the drawback schedule.

The remaining 1,100 items would now be incorporated in the new drawback schedule, taking its total count to about 4,000 items from the present 2,835.

With the DEPB facility, exporters got credit for customs duty paid on inputs used in making export goods. Under duty drawback, they receive duty-free scrips which can be used to pay import duties. The DEPB scheme was based on the assumption that the exporter used duty-paid imported inputs. Duty drawback neutralises levies paid on inputs. The revenue outgo towards the DEPB scheme has increased over the years and was Rs 8,700 crore last year.

“With withdrawal of the DEPB scheme, the government’s revenue forgone will be less. But our intention was to unify export promotion schemes, not maximise revenues,” said the Central Board of Excise & Customs chairman, S Dutt Majumder. He said the rates would be notified by the end of next week.

The ministry said the duty drawback rates for items under DEPB were recomputed taking into account prevailing customs duty rates. It was observed that for most items, the recomputed rate worked out to be far lower than the existing DEPB rates, even after removal of the ad hoc element of one to three per cent. Despite that, the ministry decided to have the minimum drawback rate at 5.5 per cent for most items, so that exporters were not adversely affected. For another 340 items, such as worsted woollen yarn, blankets and nylon twine, where the recomputed rate worked out to more than 5.5 per cent, the government has decided to provide the higher recomputed rate. The rate could be over 10 per cent for some items.

Ramu S Deora, President, Federation of Indian Export Organisations, said since reduction would be only to the extent of the stimulus component, added to DEPB rates in October 2008, the new rates will be, by and large, acceptable to the industry. He said even if the new drawback rates were a little less, the saving on account of transaction time and cost would offset the disadvantage.

Despite sluggishness in other sectors of the economy, exports turned out to be the silver line. They grew 54.2 per cent in the first four months of this financial year to touch $134.5 billion year-on-year. However, exporters were worried over discontinuation of the DEPB scheme.

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DEPB Scheme to go on 30th September

NEW DELHI: Tax incentives for exporters will be lowered from Oct 1 as the government said Friday it will do away with the popular tax refund scheme, Duty Entitlement Pass Book (DEPB), and bring them under an existing duty drawback scheme from the beginning of next month.

At the same time, the number of items eligible for the drawback scheme have been increased by 1,100 to take the number of eligible items to 4,000.

After unveiling a transitory scheme for the 14-year old DEPB scheme, Finance Secretary R.S. Gujral said tax refunds on exports of 2,130 items will be reduced by 1 to 3 percent.

"An endeavour has been made to soften the reduction and transition from the DEPB to duty drawback scheme," Gujral told reporters.

Exporters of engineering, chemical, pharmaceuticals, marine and textile products are the major beneficiaries of DEPB scheme. Tax refunds under DEPB scheme resulted in the revenue loss of Rs.8,700 crore to the government exchequer last fiscal.

The revenue loss would be reduced significantly due to the replacement of the DEPB scheme, said Chairman of Central Board of Excise and Customs S.D. Majumdar.

The reduction in tax incentives might affect the growth of exports.

India's exports jumped 54.2 percent at $134.5 billion in April-August period, led by a sharp increase in exports of engineering goods.

Officials said the government will shortly notify "all industry rates" of duty drawback for the current fiscal.

The government had constituted a committee in January under Planning Commission member Saumitra Chaudhuri for formulating the "all industry rates" duty drawback.

The committee recently submitted its report.

"Recommendations of the committee form the basis for the rates being notified," the finance ministry said in a statement.

"The DEPB Scheme has been in existence since 1997. Presently, there are 2,130 line items covered under this scheme. Incorporating these items within the drawback schedule and assigning appropriate duty drawback rates for these items was a challenge both from a product classification perspective as well as from a drawback rate perspective," an official statement said.

"Consequently, the new drawback schedule will incorporate an additional 1,100 line items(approx.) which are being taken from the DEPB list. With this, the total number of items in the drawback schedule will number approximately 4000 line items, as against the present 2835 line items," the statement added.

Most items which are already covered under the duty drawback scheme will suffer a minor reduction in the existing rates.

"The reduction is mainly on account of the reduction in basic customs duty on crude petroleum from 5 percent to nil as well as a reduction in central excise duty on diesel from Rs.4.40 per litre to Rs.2.40 per litre," a finance ministry statement said.

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Keeping home safe: Peak Customs duty to stay at 10%

NEW DELHI: The government is likely to keep peak Customs duty rate of 10% unchanged in the forthcoming budget to protect the domestic industry as a number of countries look to export their way to growth.

India had committed to lowering its import duty to the Asean level of 4.5%-5 % by 2010 but the financial crisis triggered economic turmoil caused it to pause the reduction.

“The general view is that the rate should be left untouched as domestic industry is still recovering,” said a government official privy to discussions.

Peak customs duty is imposed on more than 90% of imported goods and retaining it at the existing levels would help protect the domestic industry from cheap imports.

India’s domestic demand driven 9% GDP growth is a big contributor to the global demand and a number of countries are looking to step up exports to India.

These include the exports driven economies of Asia that face stagnant demand for their goods in the developed world.

Moreover, India has entered into number of regional and free trade agreements including thatwith Asean. Once in effect these arrangements also lead to reduction duties thereby impacting local industry here.

However, duty on inputs could be cut to boost domestic manufacturing and also help ease inflationary pressures.

The then Finance Minister P Chidambaram had last reduced peak customs duties to 10% from the present level of 12.5% in February 2007 budget.

The duties have remianed at that levels since then.

The industry lobbies have said a reduction in peak duties at this juncture could spell trouble for the domestic industry.

FICCI has said in its pre budget presentation that it would be in fitness of things if the alignment in customs tariff is calibrated with internal reforms.

Domestic manufacturers in sectors such as airconditioners, refrigerators, washing machines , picture tubes, specified plastics and other capital goods would benefit if the peak duty of 10% is retained.

India’s imports have risen 24% to over $221 billion in April-November 2010 from a year ago.

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Import duty hike on stainless steel to hit utensil makers

MUMBAI: The apex body of the country's stainless steel utensil and cutlery manufacturers has said that any import duty hike on stainless steel will have a huge hit on the industry, which employs three lakh people.

"Stainless steel attracts 5 per cent import duty now. Domestic stainless steel manufacturers are lobbying with the Government to increase that to 15-20 per cent to protect their interests. It will have a major impact on our industry, if the Government go by their demand," All India Stainless Steel Industries Association's Secretary Paresh Mehta told media.

The demand for stainless steel, the basic raw material for the utensil and cutlery industry, is around 1.4 million tonnes per annum.

"Out of that, we import around 0.4 mtpa mainly from China, Japan, Ukraine, Korea and Thailand. The rest is supllied by the domestic manufacturers of stainless steel," he said.

The domestic manufacturers do not make high grade stainless steel which are needed in some cases of specialised applications for fabrication jobs of hotel and catering equipment.

"This necessities to import stainless steel as per customers' demand," he said, adding that overseas buyers were particularly pertinent about the quality, failing of which could see the end of export business.

The utensil and cutlery industry exports materials worth Rs 1,800 crore, he said.

Meanwhile, the import of stainless steel dipped by 70 per cent to 6,000 tonnes in December last year from 20,000 tonnes a month back.

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Changes in Customs duty, Additional Customs duty rates and drawback

As part of the stimulus package announced here today, the following changes in Customs and Additional Customs duty rates, and drawback have been carried out:-

Customs and Additional Customs duty changes

On imported cement, Additional Customs duty and the special additional duty of customs [@4%] was fully exempted w.e.f 3.4.2007. This exemption has now been withdrawn. Consequently, imported cement will attract countervailing duty equal to applicable excise duty, and also special additional duty of customs @ 4%.

On zinc, customs duty was fully exempted w.e.f 29.4.2008. This exemption has been withdrawn, and the customs duty rate has been restored to the earlier rate of 5%.

On ferro-alloys, customs duty was fully exempted w.e.f 29.4.2008. Subsequently w.e.f 31.10.2008, customs duty on certain ferro-alloys, namely, ferro-molybdenum and ferro-vanadium was restored to the earlier rate of 5%. Now, the exemption provided on all other ferro-alloys has also been withdrawn, and the customs duty rate on all ferro-alloys has been restored to 5%.

On TMT (thermo-mechanically treated) bars and structurals, Additional Customs duty was fully exempted w.e.f 29.4.2008. This exemption has been withdrawn. Consequently, imported TMT bars and structurals will attract Additional Customs duty of 10%.

These changes are intended to provide a level playing field to the domestic industry. Notification No. 2/2009-Customs dated 2.1.2009 has been issued to implement these changes with immediate effect, was issued today.

Drawback changes

The drawback schedule for the financial year 2008-09 was notified with effect from 1st September, 2008. Thereafter, the Government has received several representations from exporters seeking revision in these rates, which have been examined by the Drawback Committee headed by Dr. Saumitra Chaudhury, Member, Economic Advisory Council to P.M. Based on these recommendations, the following changes are being carried out in the drawback schedule:

The drawback rates have been enhanced in respect of the following items:

a. On cotton knitted fabrics, from 4.5% to 5%;

b. On man-made knitted fabrics, from 8.7% to 8.9%;

c. On woollen knitted fabrics, from 5.7% to 5.8%; and

d. On agricultural/horticultural/forestry hand tools, from 8.5% to 10% (with a cap of Rs.7.5 per kg).

The Value cap has been enhanced in respect of the following items:

a. Cotton yarn, grey from Rs.8.00 per kg. to Rs.12.00 per kg.;

b. Complete bicycles from Rs.203 per piece to Rs. 240 per piece; and

c. Stainless steel cutlery and knives from Rs.23.50 per kg. and Rs.19.80 per kg. respectively to Rs.28.00 per kg.

In the case of texturised/twisted yarn of Polyester manufactured from partially oriented yarn (POY), on which terminal excise duty has been paid, the drawback rates are being revised to include the central excise portion.

All the above changes in drawback are being implemented with effect from 1st September, 2008. Drawback will henceforth be also allowed on boots/half boots/shoes of leather cum synthetic/textile materials at 10.5% subject to a value cap of Rs.110 per pair. The details of these changes are contained in the relevant Notifications being issued today.

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Rs 2,000-cr boost fails to cheer exporters

NEW DELHI: The government on Sunday announced a booster package of Rs 2,000 crore for exporters faced with falling orders from Western markets
and a severe credit shortage.

The incentives, part of the overall demand stimulus package announced by Planning Commission deputy chairman Montek Singh Ahluwalia, include interest rate subvention for labour-intensive sectors, additional allocation for export incentive schemes, government back-up guarantee for exports, additional funds for full refund of terminal excise duty and CST, export duty and refund of service tax on foreign agent commissions of up to 10% of value of exports.

The government has also decided to eliminate export duty on iron ore fines and reduce export duty on lumps to 5%.

While exporters are disappointed that the package is focusing on just a handful of sectors, the government has said more steps could be taken that would benefit exporters from other sectors as the committee of secretaries will keep meeting to assess the situation. “We will consider extending interest subvention to sectors beyond the ones announced today (Sunday). The committee of secretaries, which will now be headed by the Cabinet secretary, will continue to meet to assess the situation on a regular basis,” commerce secretary GK Pillai told the reporter.

But exporters feel steps need to be taken urgently. “The recession is even deeper than one thought and recovery is likely to take longer. The government should supplement the endeavour of RBI expeditiously and announce interest subvention scheme for exports along with other additional measures immediately,” said Fieo president Ganesh Kumar Gupta.

Delhi Exporters Association (DEA) president SP Agarwal pointed out that over 10,000 units had closed down and there was urgent need for more action. “We do not want incentives in a piece-meal basis. We expect a sound package from the government which should include income tax exemption for exporters,” Mr Agarwal said.

According to the package announced on Sunday, pre- and post-shipment export credit for five labour-intensive sectors, including textiles (which incorporates handlooms, carpets and handicrafts), leather, gems & jewellery, marine products and the small and medium enterprise (SME) will be given an interest subvention (or discount) of 2% up to March 31 2009 subject to minimum rate of interest of 7% per year.

“This would cost the exchequer about Rs 400 crore,” Mr Pillai said.

An additional allocation for export incentive schemes of Rs 350 crore has been made which will be distributed to schemes like the Vishesh Krishi and Gram Udyog Yojana and the Market Development Assistance. The handicrafts sector, which employs many, has been included in the VKGUY scheme which will enable exporters to get import duty reimbursements of up to 5% of the total value of exports. It will cost the government about Rs 150 crore annually.

With the global financial meltdown increasing the risk of defaults, the government has decided to give back-up guarantee to the export credit guarantee corporation to the extent of Rs 350 crore.

Another significant decision which will improve fund availability is allocation of Rs 1,100 crore to ensure full refund of terminal excise duty and central sales tax. Exporters will also be allowed refund of service tax on foreign agent commissions of up to 10% FOB value of exports.

They will also be allowed refund of service tax on output services while availing of benefits under the duty drawback scheme. This is significant as a large number of exporters were not able to get service tax refunds because of the clause. “We had to try hard to convince the finance ministry that drawback does not include service tax,” Mr Pillai said.

To encourage exports, the government has eliminated export duty on iron ore fines and reduced duty on lumps to 5%.

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Revision of Excise and Customs Duty Rates and Service Tax Refund to exporters

To provide a fiscal stimulus to the economy through stimulation of demand and relief to the manufacturing sector, Government has carried out certain changes in Excise and Customs duty rates. Some changes have also been made in respect of Service tax refund scheme for exporters. The details of these changes are as under:-

I.Central Excise

The three major ad valorem rates of Central Excise duty viz. 14%, 12% and 8% applicable to non-petroleum products have been reduced by 4 percentage points each. The revised rates will be 10%, 8% and 4% respectively.

Cars, other than small cars, attract composite rates – that are a combination of specific and ad valorem rates. The rates applicable hitherto were ‘24% + Rs.15,000/-` per unit for cars of engine capacity 1500 cc to 1999 cc and ‘24% + Rs.20,000/-` per unit for cars of engine capacity of 2000 cc or more. The ad valorem component of these rates has been reduced from 24% to 20%.

In the case of cement, which attracts either the ad valorem rate of 12% or specific rates (Rs./metric tonne) depending upon the retail sale price, the specific rates have also been reduced in the same proportion as the ad valorem rate. Further, the concessional rates for cement produced by mini-cement plants have also been reduced proportionately. Bulk cement would now be chargeable to either 10% ad valorem or Rs.280/- per tonne, whichever is higher.

The rate of duty on cotton textiles and textile articles has been reduced from 4% to Nil. No change has been made in the excise duty rates on petroleum products, specific rated items and tobacco products.

Notification No.58/2008-Central Excise and Notification No.59/2008-Central Excise, both dated 07.12.2008 have been issued in this regard.

II. Customs duty

To provide relief to the power sector, naphtha imported for generation of electric energy has been fully exempted from basic customs duty. This exemption will be available upto 31.03.2009. Notification No.128/2008-Customs dated 07.12.2008 has been issued in this regard

III. Export duty on iron ores

The export duty of 8% on iron ore fines has been withdrawn while the rate of export duty on iron ore lumps has been reduced from 15% to 5% ad valorem.

Notification No.129/2008-Customs, and Notification No.130/2008-Customs both dated 07.12.2008 were issued in this regard here today.

IV. Service Tax

Notification No.41/2007-Service Tax provides for refund of service tax paid by exporters on 18 taxable services attributable to export of goods. The benefit of such refund has now been extended to services provided by a clearing and forwarding agent to exporters also. In addition, the threshold limit of refund of service tax paid by exporters on foreign commission agent services has been enhanced from 2% of FOB value to 10% of FOB value of export goods. Further, drawback benefit can now be availed of simultaneously with refund of service tax paid in respect of exports. Notification No.33/2008-Service Tax, dated 07.12.2008, amending the aforesaid notification No.41/2007-Service Tax was issued in this regard here today.

V. All the aforesaid changes are effective from 7.12.2008.

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Government Announces Measures for stimulating the Economy

The Government has been concerned about the impact of the global financial crisis on the Indian economy and a number of steps have been taken to deal with this problem.

The first priority was to re-assure the people of the stability of the financial system in general and of the safety of bank deposits in particular. To this end, steps were taken to infuse liquidity into the banking system and also to address problems being faced by various non-bank financing companies. These steps have ensured that the financial system is functioning effectively without suffering the kind of loss of confidence experienced in the industrialised world.

Having assured stability of the system, the Government has focussed its attention on countering the impact of the global recession on India's economic growth. On the monetary side, the RBI has sought to pump sufficient liquidity into the banking system to enable bank credit to meet the expanded requirements of the economy keeping in mind the contraction in credit from non-bank sources. Banks have been provided adequate liquidity through a series of reductions in the CRR and additional flexibility in meeting the SLR requirement. Interest rate reductions have also been signalled by reductions in the repo and reverse repo rates, the most recent of which was announced on Saturday when both the repo rate and the reverse repo rate were cut by 100 basis points. Access to external commercial borrowings has also been liberalised so that borrowers capable of accessing funds from abroad are allowed to do so. The banks are being encouraged to counter what might otherwise become self-fulfilling negative expectations by enhanced lending to support economic activity.

These measures in the area of money and credit are being supplemented by fiscal measures designed to stimulate the economy. In recognition of the need for a fiscal stimulus, the government had consciously allowed the fiscal deficit to expand beyond the originally targeted level because of the loan waivers, issue of oil and fertilizer bonds and higher levels of food subsidy. In addition, the following steps are being taken:

1. Plan Expenditure:

In order to provide a contra-cyclical stimulus via plan expenditure, the Government has decided to seek authorisation for additional plan expenditure of upto Rs 20,000 crore in the current year. In addition, steps are being taken to ensure full utilisation of funds already provided, so that the pace of expenditure is maintained. The total spending programme in the balance four months of the current fiscal year, taking plan and non-plan expenditure together is expected to be Rs.300,000 crore.

The economy will continue to need stimulus in 2009-2010 also and this can be achieved by ensuring a substantial increase in plan expenditure as part of the budget for next year.

2. Reduction in Cenvat:

As an immediate measure to encourage additional spending, an across-the-board cut of 4% in the ad valorem Cenvat rate will be effected for the balance part of the current financial year on all products other than petroleum and those where the current rate is less than 4%.

3. Measures to Support Exports

i) Pre and post-shipment export credit for labour intensive exports, i.e., textiles (including handlooms, carpets and handicrafts), leather, gems & jewellery, marine products and SME sector is being made more attractive by providing an interest subvention of 2 percent upto 31/3/2009 subject to minimum rate of interest of 7 percent per annum

ii) Additional funds of Rs.1100 crore will be provided to ensure full refund of Terminal Excise duty/CST.

iii) An additional allocation for export incentive schemes of Rs.350 crore will be made.

iv) Government back-up guarantee will be made available to ECGC to the extent of Rs.350 crore to enable it to provide guarantees for exports to difficult markets/products.

v) Exporters will be allowed refund of service tax on foreign agent commissions of upto 10 percent of FOB value of exports. They will also be allowed refund of service tax on output services while availing of benefits under Duty Drawback Scheme.

4. Housing

Housing is a potentially very important source of employment and demand for critical sectors and there is a large unmet need for housing in the country, especially for middle and low income groups. The Reserve Bank has announced that it will shortly put in place a refinance facility of Rs.4000 crore for the National Housing Bank. In addition, one of the areas where plan expenditure can be increased relatively easily is the Indira Awas Yojana. As a further measure of support for this sector public sector banks will shortly announce a package for borrowers of home loans in two categories: (1) upto Rs.5 lakhs and (2) Rs 5 lakh-Rs 20 lakh. This sector will be kept under a close watch and additional measures would be taken as necessary to promote an accelerated growth trajectory.

5. MSME Sector

The Government attaches the highest priority to supporting the medium, small and micro enterprises (MSMEs) sector which is critical for employment generation. To facilitate the flow of credit to MSMEs, RBI has announced a refinance facility of Rs.7000 crore for SIDBI which will be available to support incremental lending, either directly to MSMEs or indirectly via banks, NBFCs and SFCs. In addition, the following steps are being taken.

(a) To boost collateral free lending, the current guarantee cover under Credit Guarantee Scheme for Micro and Small enterprises on loans will be extended from Rs.50 lakh to Rs.1 crore with guarantee cover of 50 percent.

(b) The lock in period for loans covered under the existing credit guarantee scheme will be reduced from 24 to 18 months, to encourage banks to cover more loans under the guarantee scheme.

(c) Government will issue an advisory to Central Public Sector Enterprises and request State Public Sector Enterprises to ensure prompt payment of bills of MSMEs. Easing of credit conditions generally should help PSUs to make such payments on schedule.

6. Textiles

(a) An additional allocation of Rs.1400 crore will be made to clear the entire backlog in TUF Scheme.

(b) All items of handicrafts will be included under 'Vishesh Krishi & Gram Udyog Yojana'.

7. Infrastructure Financing

A large number of infrastructure projects are now being cleared for implementation in the Public Private Partnership mode. These projects may experience difficulty in reaching financial closure given the current uncertainties in the financial world. In order to support financing of such projects, Government has decided to authorise the India Infrastructure Finance Company Limited (IIFCL) to raise Rs.10,000 crore through tax-free bonds by 31/3/2009. These funds will be used by IIFCL to refinance bank lending of longer maturity to eligible infrastructure projects, particularly in highways and port sectors. In this way it is expected that IIFCL resources used for refinance can leverage bank financing of double the amount. Depending on need, IIFCL will be permitted to raise further resources by issue of such bonds. In particular, these initiatives will support a PPP programme of Rs.100,000 crore in the highways sector.

8. Others

(a) Government departments will be allowed to take up replacement of government vehicles within the allowed budget, in relaxation of extant economy instructions.

(b) Import Duty on Naphtha for use in the power sector will be eliminated.

(c) Export duty on iron ore fines will be eliminated and on lumps will be reduced to 5%.

The Government is keeping a close watch on the evolving economic situation and will not hesitate to take any additional steps that may be needed to counter recessionary trends and maintain the pace of economic activity.

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Safeguard levy to fight cheap imports

NEW DELHI: The government is examining a plan to impose safeguard, or temporary, Customs duties to help sectors such as steel and chemicals fight a surge of cheap imports, notably from China, officials say.

It has also asked the local industry to help identify products which have seen a big rise in imports in the past few months, as it looks to use all weapons in its arsenal to protect domestic manufacturers, they said.

The government has expedited anti-dumping investigations against cheap imports of a large number of items, mostly from China, and has imposed import restrictions on products used by the automobile and construction industries.

“Imposition of safeguard duties is another option for protecting the domestic industry we can explore. We are putting in place the mechanism which would allow us to take action against import surges,” a government official, who asked not to be named, said.

While anti-dumping duties are imposed if it is established that a country is exporting goods at prices lower than what it is sold for locally, safeguard duties can be imposed if there is a surge in imports leading to market disruption and serious injury to domestic industry.

Since demand in India’s traditional export markets such as the EU, US and Japan is drying up due to the global economic downturn, the government is keen to ensure the domestic industry is protected by catering to the growing domestic market. It is, therefore, exploring a variety of measures to check cheap imports.

The domestic steel industry, hit by falling international prices and imports from China, has received help from the government in the form of fast anti-dumping investigations and import curbs restricting imports of items such as seamless pipes and tubes to only actual users.

“For products where anti-dumping duties cannot be imposed, the Centre can consider imposing safeguard duties,” the official added.

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Revision of customs duties on certain items and procedural simplification in Service Tax refund to exporters

In the wake of the recent fall in the international prices of commodities and with a view to safeguard the interests of domestic producers, Government have carried out certain changes in the customs duty rates. The details of these changes are as under:

(i) Withdrawal of the full exemption from customs duty granted earlier on specified iron and steel items such as Pig iron, spiegeleisen, semi-finished products, flat products and long products. Consequently, they will be subject to a basic customs duty of 5% ad valorem.

(ii) Withdrawal of full exemption from customs duty granted earlier on crude soyabean. Consequently, crude soyabean oil will be subject to a basic customs duty of 20% ad valorem. There is no change in the import duty on refined soyabean oil.

These changes come into effect on the 18th of November, 2008. Notification No.122/2008-Customs dated 18.11.2008 has been issued in this regard.

With a view to simplify the refund based service tax exemption scheme on taxable services attributable to exports, the time limit for filing refund claims has been extended from 60 days to six months. In respect of technical testing and analysis service, the documentation required for claiming refund has been simplified. Notification No.32/2008-Service Tax dated 18.11.2008, amending notification No. 41/2007-Service Tax has been issued in this regard.

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Exporters disappointed over duty drawback reduction New Delhi, Aug. 30 Exporters by and large have voiced concerns over the revised all-industry draw

New Delhi, Aug. 30 Exporters by and large have voiced concerns over the revised all-industry drawback rates for 2008-09 announced by the Finance Ministry on Friday, stating that the general reduction in duty rates was a disappointment as it came at a time of weak external demand and also when the export credit subvention scheme was set to be withdrawn by the Government.

“The new rates have come at a time when most export industries are in bad shape. The reduction in drawback rates will adversely impact sectors like textiles,” Mr Ganesh Kumar Gupta, President of Federation of Indian Export Organisations (FIEO), told Business Line.

He said FIEO expected the Finance Ministry to pay heed to the submissions of various economic ministries like commerce and textiles to continue with existing drawback rates for some more months rather than bringing about changes in such rates. Mr Gupta said there has been a general reduction in drawback rates in most of the items.

General reduction

The sectors where there have been a general reduction in drawback rates include textiles and textile articles, leather and leather articles, metals and articles of metals and bicycle and bicycle parts.

Drawback rates of polymers (HDPE, LDPE and polypropylene), linear alkyl benzene (LAB) and purified terephthalic acid (PTA) have been reduced.

The rates have been increased from 7.6 per cent to 9 per cent and 6.5 per cent to 7.6 per cent on flax yarn and flax fabric respectively.

In textiles and textile articles, the Finance Ministry had reduced the drawback rate for higher quality silk fabrics from 10.8 per cent with a drawback cap of Rs 325 a kg to 9.8 per cent with a drawback cap of Rs 295 a kg.

The rate for fabrics of noil silk has also been revised downwards.

In the case of wool tops, woollen yarn and fabrics, the drawback rates have been decreased by about 18 per cent to 21 per cent.

The caps have also been revised downwards.

For grey cotton yarn, the new rate has been pegged at four per cent irrespective of the counts of the yarn.

cotton yarn

In the case of cotton yarn (dyed), the drawback rate is five per cent irrespective of the counts of the yarn, against six per cent (grey)/7.1 per cent (dyed) earlier. For cotton yarn of 60 counts and more, the earlier rate was 9.5 per cent (grey)/10.6 per cent (dyed).

As for cotton fabrics, the new rate is 4.6 per cent (grey)/5.5 per cent (dyed) with a drawback cap of Rs 14 a kg (grey)/ Rs 20 a kg (dyed). In the case of denim fabrics, the new rate is 5.7 per cent with a cap of Rs 21.5 a kg as against the earlier rate of 8.5 per cent with a cap of Rs 32 a kg.

In the case of synthetic/artificial filament yarn, only customs component of drawback rates has been prescribed.

The drawback rate for Synthetic Filament Yarn now is 2.2 per cent (grey)/2.6 per cent (dyed) and for artificial filament yarn 2.1 per cent (grey)/2.5 per cent (dyed) as against the earlier rate of 3 per cent (grey)/3.5 per cent (dyed) for both types of filament yarn.

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New duty drawback rates effective from Monday

NEW DELHI: The finance ministry on Friday revised duty drawback rates, effecting an across-the-board reduction in line with the duty changes made this year. The changes are based on the recommendations of a committee set up by the finance ministry to study drawback rates.

Duty drawback rates seek to neutralise the incidence of Customs duty, central excise duty and service tax borne by an exported article. The revised rates would come into effect from September 2008, the Central Board of Excise and Customs said in a statement.

The decrease is largely in the case of petrochemicals due to phasing out of import duty on crude oil. The peak rate of aggregate import duties in 2008-09 has come down to 31.7% as compared to 34.13% in the previous year. Customs duty on major raw materials such as crude oil, raw cotton, zinc and Ferro alloys has been eliminated. The excise duty has been reduced across the board from 16% to 14%.

Drawback rates have been increased for some items like flax yarn, which will now be eligible for 9.6% duty from 7.5% earlier. The rate for optical fibre has been increased to 1.2% from 1% earlier. Wooden artwork too would also attract higher drawback rate.

In most cases, the net realisation for exporters would remain unchanged since the finance ministry has pegged the rupee higher against the dollar as compared to last year. The rupee was pegged at 39 to a dollar last fiscal as against 43 in the current revision.

Finance ministry had set up a panel under Prime Minister’s Economic Advisory Council member Saumitra Chaudhuri to determine the rates.

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Exporters may have to settle for lower duty drawback rates

Exporters may have to settle for lower all-industry duty drawback rates for 2008-09 when the new rates are announced in the coming week.

The Government appointed three-member committee for formulating the duty drawback rates is understood to have recommended “generally lower rates” for 2008-09 than those suggested for the previous year.

The committee, headed by Dr Saumitra Chaudhuri, Member of the Prime Minister’s Economic Advisory Council, had recently submitted its report to the Finance Minister, Mr P. Chidambaram. Almost 90 per cent of exporters rely on the all-industry drawback rates.

Sources said that the significant reduction in customs and excise duties on many raw materials in Budget 2008-09 and also in the following months has led to lower recommended rates, especially for the downstream finished products. Rupee movements have had very little bearing on the recommended rates.

Meanwhile, Dr Chaudhuri told Business Line that the committee had taken the “most recent prices” (April-June 2008) of the input materials for arriving at the recommended duty drawback rates.

Interestingly, the committee has, for its recommendations, not limited itself to only the duty changes made in Budget 2008-09, but has also factored in the major duty rejig made by the Government in June 2008 on crude oil, petrol and diesel and also the removal of customs duty on raw cotton in July 2008.

Factoring in the duty changes in crude oil and other petroleum products has impacted the drawback rates of downstream finished products in the petrochemical industry, leading to lower recommended drawback rates for various products including plastics and manmade fibres, sources said.

In the first week of June 2008, the Government had removed customs duty on crude oil and also cut by 5 per cent the customs duty on petrol and diesel to 2.5 per cent. The customs duty on aviation turbine fuel (ATF) was also reduced. Besides, excise duty on petrol and diesel was cut by Re 1 a litre to Rs 13.35 and to Rs 3.60, respectively.

Taking into account the customs duty abolition on raw cotton has led to lower recommended duty drawback rates on certain finished garments.

The all-industry duty drawback rates are worked out by considering the consumption of input materials and the incidence of duties on these input materials.

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Drawback panel gets more time to submit report

New Delhi, July 17 The three-member committee set up by the Government for formulation of all-industry duty drawback rates for 2008-09 has been given more time to submit its report.

Official sources said that the committee had sought extension till August 11 and that has been granted. The drawback rates for exporters are worked out and notified every year after taking into account the budgetary changes in excise duty, customs and service tax.

The all-industry rates of duty drawback are worked out by considering the consumption of input materials and the incidence of duties on these input materials.

Traditionally, the drawback rates are announced in June or latest by July every year.

Sources in the export fraternity said that the surge in inflation has led to hike in raw material costs in many industries.

To add to this knotty issue is the recent depreciation in rupee against the dollar. Both these factors may have prompted the committee to go in for extensive data collection and consultations before announcing the rates, sources added.

Almost 90 per cent of the exporters rely on the all-industry drawback rates. The rates are usually applied only on prospective basis.

Rates may be lower

Exporters have been eagerly awaiting the announcement of the drawback rates for 2008-09 and the expectations are that the rates would be on the lower side compared with last year.

In March, the Finance Ministry had constituted a three-member committee for the formulation of all-industry duty drawback rates.

The Committee comprised Mr Saumitra Chaudhuri, Member of the Prime Minister’s Economic Advisory Council; Mr S.B. Mohapatra, Secretary to the Government of India (retired); and Mr T.R. Rustagi, Chief Commissioner of Central Excise and Customs (retired).

Under the duty drawback scheme administered by the Revenue Department, the customs and central excise duty paid on inputs and service tax paid on input services used in the manufacture of export goods are refunded to the exporters in the form of duty drawback.

Budget 2008-09 had seen wide ranging changes in excise duties, including a general reduction in the Cenvat rate from 16 to 14 per cent. There were also changes in customs duties.

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Govt cuts duty on various items to combat inflation

NEW DELHI: The government on Tuesday announced more measures to combat inflation and discipline industry, which together covered the strategies of saam (kind words), daam (material inducement), dand (penal measures) and bhed (threats and abuse) recommended by Indian tradition to persuade recalcitrants.

The Prime Minister appealed to the industry to show restraint and not abuse market power, and to hold the price line.

The Finance Minister announced tax concessions, duty cuts and export disincentives, and declared that the government would consider adopting ‘administrative measures’ to discipline sections of the industry taking undue advantage of short-term shortages.

The Finance Minister extended tax waivers for refineries and export-oriented information technology enterprises and exempted all categories of electric vehicles from excise duty.

The fiscal package includes export duties on select steel items and basmati rice, which seek to make exports costly and augment domestic supplies. At the same time, customs duties have been cut on steel, ferro alloys, coking coal, zinc, skimmed milk and butter oil to ease supply crunch and soften prices. The import duty on newsprint, too, has been cut from 5% to 3%.

Concluding the debate on the Finance Bill, Finance Minister P Chidambaram said the UPA government’s policies — fiscal, monetary and financial — were aimed at making growth inclusive. The Lok Sabha passed the Finance Bill 2008-09.

The rejig in the tax structure to counter inflation, however, would leave the exchequer poorer by Rs 1,500 crore. These anti-inflation measures primarily target steel, which contributes a fifth of the current spurt in prices — inflation is at a three-year high of 7.33%.

Proposing these changes to the Finance Bill, Mr Chidambaram said: “Currently, steel and steel products contribute about 21.3% of inflation.

The objective of containing domestic prices will not be achieved unless we augment the domestic supply/availability of intermediates and finished products. Despite a slowdown during 2007-08, the value of exports of steel items was as high as Rs 26,000 crore in that year. Against this background, there is a case for disincentivising the export of steel.”

While the government has taken the approval of the House to impose up to 20% export duty on steel, it has imposed variable duty at the rate of 15%, 10% and 5% depending on value addition and the consumption of products in the domestic market. Besides, basic customs duty on hot-rolled coils and cold-rolled coils has been reduced from 5% to nil. Imports of inputs like zinc, ferro alloys and met coke — used in the production of steel — have also been exempted from customs duty. Countervailing duty on TMT bars and structurals commonly used for construction of houses has been scrapped, to augment supply via imports.

Export duty has also been imposed on basmati at the rate of Rs 8,000 per tonne even as its minimum export price (MEP) has been reduced roughly by the same amount, from $1,200 per tonne to $1,000 per tonne. The move is expected to cool prices of rice that have risen by 20% over the past year. Customs duty on skimmed milk powder has been cut from 15% to 5% for a Tariff Rate Quota of 10,000 tonnes per annum. Similarly, customs duty on butter oil, which is used for reconstituting liquid milk, has been cut from 40% to 30%. While changes in import duty rates will be effective from Tuesday, changes in export duty will come into effect on the date the Finance Bill, 2008, receives the President’s assent.

The government has managed to bring cheer to the IT sector. Bowing to popular demand, the tax holiday for Software Technology Parks of India and export-oriented units (EoUs) under Sections 10A/10B of the Income Tax Act has been extended till March 31, 2010. This comes even though the Kelkar taskforce and the Prime Minister’s Economic Advisory Council failed to favour extension of the tax holiday.

The good news, however, is not limited to IT. The seven-year tax holiday for oil refining companies has also been extended till 2012. However, the extension would benefit refineries that were either notified by the government before March 31, 2008, or are wholly-owned by the public sector, or companies in which 49% is with the public sector or companies that begin refining on or before March 31, 2012. However, the issue of whether natural gas is eligible for tax benefits available for crude exploration has been left to be settled by courts. “I may assure potential bidders that the benefit of Section 80IB(9), as finally interpreted by the courts, will be applicable to all exploration & production contracts, whether obtained through nomination or bidding,” he said.

The Agriculture Produce Marketing Committee and the state agricultural marketing boards, which are registered as charitable institutions, will continue to enjoy income-tax exemption. So, will the chambers of commerce and similar organisations rendering services to their members, which will not be affected by the change in the definition of charitable institutions. Some relief has also been given to assessees on account of tax deducted at source in cases where it was deducted and not paid in time under Section 40(a) of the Act. Income-tax exemption to the Coir Board will now be applicable with retrospective effect from April 1, 2002.

While extending tax sops, the finance minister expressed hope that exemptions can be done away with and tax rates lowered. “Eventually, we would have to move towards a system of taxation where the exemptions are few, each exemption is reviewed periodically and each exemption comes to an end after a reasonable period of time. I am confident that the new Income Tax Code that will be placed in the public domain for discussion will reflect my philosophy in this regard and I hope that, in due course, the new Income Tax Code will, after deliberations, become law.”

Taking a dig at members who had raised the issue of increasing tax rates for rich people and corporates, he said: “I think I would not be revealing any secret if I say that every request for exemption has the support of one or more Members of this House, irrespective of political affiliations.”

He also pointed out that the tax to GDP ratio had increased from 9.2% in 2003-04 to 12.5% at the end of 2007-08 and the cost of tax collection on the direct taxes side is 60 paise per Rs 100 and on indirect taxes side, 65 paise per Rs 100. He said state governments were drawing benefits of this revenue boom and had become fiscally more sound.

Green is in. The government has exempted two-wheeler and three-wheeler electric vehicles from excise duty to promote emission-free and environment-friendly transport. Earlier, the Finance Bill had proposed to exempt just electric cars from excise duty. The packaged cement would now attract an ad valorem duty of 12% on retail sales price instead of specific duty of Rs 600 per metric tonne on Rs-250 bag of 50 kgs. Rechargeable kits of water filters that run without electricity have been exempted from 14% excise duty. Excise duty exemption has been restored to projectile type of shuttle-less looms as it is still not manufactured in India.

On the customs duty front, the government has extended the full exemption to cut and polished coloured gemstones and rough synthetic gemstones that currently attract 5% duty. Customs duty has been reduced on newsprint against the backdrop of rising newsprint prices from 5% to 3%. Customs duty has been raised from 30% to 50% in lieu of the safeguard duty on tapioca starch to protect the domestic industry. With a view to providing a level-playing field to domestic units, it is now being prescribed that EoUs would be liable to pay anti-dumping duty on imported inputs either sold directly or contained in finished products that are sold in the domestic market.

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India Scraps Import duties to Curb Prices

April 29 (Bloomberg) -- India today scrapped import taxes on pig iron and other steel products to bolster domestic supplies and curb inflation, holding near a three-year high.

The country will also levy export taxes on steel products including cold-rolled coils, Finance Minister Palaniappan Chidambaram told lawmakers in parliament today.

The import duty cuts, effective today, will cost the government 15 billion rupees ($371 million), Chidambaram said. Anti-inflation measures announced earlier would have cost the government 48.4 billion rupees, he said.

Wholesale prices rose 7.41 percent in the last week of March from a year earlier, the most since November 2004, according to government data. Price gains eased to 7.33 percent in the week ended April 12.

The export taxes will take effect when the budget proposals get the assent of the president, Chidambaram said.

The following are details of import duty changes:

* Basic customs duty reduced to zero from 5 percent on imports of
pig iron and mild steel products, including sponge iron,
granules, powders, ingots, billets, semi-finished products, hot-
rolled coils, cold-rolled coils, coated coil sheets, bars, rods,
angle shapes, sections and wires.

* Countervailing duty scrapped from the current 14 percent on TMT
bars and structurals, commonly used for construction of houses.

* Basic customs duty scrapped from the current 5 percent on
metallurgical coke, ferrous alloys and zinc, three inputs used
for manufacturing steel.

The following are details of new export duty levies:

* 15 percent export tax on overseas sales of specified primary
forms, semi-finished products, hot-rolled coils and sheets.

* 10 percent export tax on specified roll products, including
cold-rolled coils, pipes and tubes.

* 5 percent export tax on galvanized steel in coil and sheet
form.

Other measures:

* Reduction of import duty on skimmed milk powder to 5 percent
from 15 percent for a tariff rate quota of 10,000 metric tons per
year.

* Reduction of import duty on butter oil, used for milk
production, to 30 percent from 40 percent.

* Imposition of an export tax of 8,000 rupees per ton on overseas
sales of basmati rice.

* Reduction in the minimum export price of basmati to $1,000 per
metric ton from $1,200.

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Export duty may hit steel cos in long run

MUMBAI: Finance Minister P Chidambaram’s imposition of export duty on steel has evoked mixed reactions. While the user industries feel the proposed export levy will pull down the prices of the metal in the domestic market, steel makers think the measure will be counterproductive and will affect the industry in the long run.

Executives of leading steel companies told ET that they have to honour the long-term export commitments with their overseas customers and, therefore, won’t be able to reduce supply in the international markets.

“It will only squeeze better realisation of domestic steel companies, which have been hard-hit by the rise in raw material costs in international markets. In addition, there are certain items, especially in flat products, which have few takers within India,” said an executive of a top steel company who did not wish to be named.

Exporters enjoy a premium of nearly $200 a tonne in the overseas market over the domestic industry.

Mr Chidambaram on Tuesday announced a 15% export duty on primary steel and HR coils and 10% duty on CR coils. However, customs duty on pig iron, sponge semi-finished HR coils, angel shapes has been cut from 5% to nil. He also announced abolition of customs duty on basic steel-making inputs like metcoke, ferro-alloys and zinc, as well as the countervailing duty on construction products like TMT bars.

An official of a real estate company said steel prices should come down on two counts. One, the basic principle of economics suggests that the measures would increase supply of steel in the domestic market and thereby create pressure on rising steel prices. Two, the measures will make metcoke prices cheap and thereby, will reduce the raw material cost.

Responding to this, an official in a steel maker said the proposed abolition of customs duty on metcoke will make the raw material cheaper by $25 per tonne. Coke prices have gone up to $300 a tonne from $96 a tonne in a year. So the impact will be negligible.
“Also, Indian steel makers are supplying to the world market after feeding the domestic market. Even if the entire export comes to a halt, it will have no impact (on the domestic prices),” he said. Last year, India produced nearly 60 million tonne of steel, exported 4.2 million tonne and imported 5.99 million tonne.

J Mehra, CEO of Essar Steel Holding said unless the government takes some long term measures such as facilitating additional capacities, steps like the one taken on Tuesday could be counter- productive.

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Illogical ban on castor oil export

Mumbai, March 25 Hasty decisions often lead to unintended consequences; and our government is in the habit of taking hasty decisions that hurt not the Government itself or the officials responsible for such decisions, but industry and trade who are at the receiving end of such decisions.

Notification (No. 85 dated March 17) banning of edible oil export is a case in point. Export of all edible oils under chapter 15 of Schedule I to the Export Policy has been prohibited.

Chapter 15 lists several vegetable oils, both edible and non-edible, including castor oil which is an industrial oil.

Customs authorities have stopped processing documents for export of castor oil citing the DGFT notification. No official in the Commerce Ministry or in the DGFT office seems to have had a look at Chapter 15 in the Policy book or applied his mind while drafting the notification.

The consequence is that castor oil exports stand banned. Very clearly, it is a faux pas. Someone must assume responsibility for it. The decision needs to be reversed and it should be specifically clarified which oils are banned and those allowed for export. But if we know the way of the government, the clarification is unlikely to come out anytime soon. The Commerce Ministry will have to set off a round of correspondence with other concerned ministries (Food and Consumer Affairs, for instance) and seek their clearance - a process that will take time.

Meanwhile, castor oil export contracts are in a state of limbo. While domestic market for both oil and seeds may collapse and hurt growers, prices overseas are likely to shoot up.

Indian exporters may also be dragged into arbitration proceedings.

India is the world’s largest producer and exporter of castor oil.

The world market depends on India as an origin to supply the global needs. Castor oil is used for a number of industrial applications including paints, varnish, resins, plasticisers and so on. Annual export of this versatile industrial oil is about 2,00,000 tonnes and the country earns over Rs 800 crore in foreign exchange. There is also a growing market for value-added castor oil products such as derivatives - hydrogenated castor oil, dehydrated castor oil and so on. Current export prices of $ 1,300 a tonne are quite attractive considering strong global vegetable oil market.

The totally unexpected decision to ban export is turning out to be a matter of acute embarrassment for the exporters here. They are unable to explain the rationale behind the export ban. Ironically, it was exactly a month earlier that the Solvent Extractors Association of India (SEA) successfully held an international seminar for promoting castor oil exports in which a number of overseas delegates including from countries as far apart as China and Holland participated.

The other unintended consequence of the hasty ban on export is that vegetable fats of tree-borne oilseeds also stand prohibited. According to SEA, we export about 10,000 tonne of vegetable fats from minor forest produce (sal fat, mango kernel fat, kokum fat etc). Tribals do the collection of tree-borne oilseeds and there is no domestic market for these special fats. It makes little sense to prohibit the export of minor forest produce and hurt the interests of tribals.

The trade and industry will be forced to bear the negative consequences of an unthinking ban by the Commerce Ministry. Clearly, policy risk to business – especially agribusiness – stands heightened. All notifications state that the decision is taken in public interest. It is time the Government is forced to spell out what public interest its decisions serve. -- G. Chandrashekhar

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