Service tax goes for all exporters

EXPORTERS of all goods and services, including those from domestic tariff area (DTA), have now been exempted from service tax. Also exporters with minimum turnover of Rs 5 crore and a sound track record have been exempted from furnishing bank guarantees in any of the export schemes so as to reduce their high transaction cost and tax burden.

This forms part of a slew of new export policy support measures proposed in the five-year (2004-09) Foreign Trade Policy announced by the Union Commerce and Industry Minister, Mr Kamal Nath, here which aims at doubling India's percentage share of global merchandise trade to 1.5 per cent by 2009 from 0.7 per cent in 2003, besides serving as an effective tool to generate employment, especially in semi-urban and rural areas.

Thus special focus initiatives for sectors such as handicrafts, handlooms, gems & jewellery and leather footwear were announced, besides agriculture. The threshold limit of designated "Towns of Export Excellence" is reduced to Rs 250 crore from Rs 1,000 crore in these thrust sectors too.

A special package for agriculture "Vishesh Krishi Upaj Yojana" to boost exports of flowers, fruits, vegetables, minor forest produce and their value-added derivatives has been announced. Export of these products would qualify for duty-free credit entitlement equal to 5 per cent of the FOB value of exports and capital goods imported under Export Promotion Capital Goods for agriculture would be duty-free.

In another new scheme "Target Plus", exporters would be entitled to duty-free credit based on incremental exports substantially higher than the general annual export target. For incremental growth of over 20 per cent, 25 per cent and 100 per cent, the duty-free credits would be 5 per cent, 10 per cent and 15 per cent, respectively, of FOB value of incremental exports.

The duty-neutralisation scheme on imported inputs, Duty Entitlement Pass Book (DEPB) would be continued till it is replaced by a new scheme, to be drawn up in consultation with exporters. The Board of Trade would be revamped to ensure continued interaction between other wings of the Government and the Board of Trade to boost exports.

The Minister declared a new rationalised scheme of categorisation of status holder as "Star Export Houses", designating them from `One Star' to `Five Star' depending on their total exports during the current and previous three years. "The entry level for qualifying for status is now Rs 15 crore in three years. We are confident that this will bestow status on a large number of hitherto unrecognised small exporters," Mr Kamal Nath said.

A new scheme to establish Free Trade and Warehousing Zones (FTWZs) to make India a global trading hub has been announced.

This is aimed at creating "trade-related infrastructure to facilitate the import and export of goods and services with freedom to carry out trade transactions in free currency," he said.

Foreign direct investment would be permitted up to 100 per cent in the development and establishment of the zones and their infrastructure facilities.

Each zone would have a minimum outlay of Rs 100 crore and units in the FTWZ would qualify for all other benefits as applicable to units in the Special Economic Zones.

The policy provides special benefits to 100 per cent export-oriented units (EOUs), including exemption of EOUs from service tax in proportion to their exported goods and services, besides permission to retain 100 per cent of export earnings in EEFC (Exchange Earners Foreign Currency) Account.

A Biotechnology Park Scheme, getting all facilities of 100 per cent EOUs, is proposed, as application of biotechnology is recognised to pay rich dividends in terms of new products and technologies.

For services export, Mr Kamal Nath introduced a "Served From India" scheme as a brand instantly recognised abroad, under which individual service providers earning foreign exchange of at least Rs 10 lakh would be eligible for a duty credit entitlement of 10 per cent of total foreign exchange earned by them.

In the case of stand-alone restaurants, the entitlement would be 20 per cent, whereas in hotels it would be 5 per cent.

There would be exclusive Services Export Promotion Council to map out opportunities in key services in principal markets and foster strategic market access programmes, including brand building in concert with recognised nodal bodies of the services industry.

The policy also announced setting up of grievance redressal of trade and industry, besides simplifying procedures on all matters relating to exporters' interaction with the DGFT in a bid to reduce transaction cost.

FOREIGN TRADE POLICY 2004-09 AIMS HIGH

* Big push to exports to garner 1.5 per cent of the world share by 2009.

* FDI permitted up to 100 per cent to establish and develop free trade and warehousing zones.

* New scheme to boost exports of fruits, vegetables, flowers and minor forest produce.

* Duty-free import of capital goods under EPCG scheme for agriculture sector.

* Import of seeds, bulbs and tubers liberalised.

* "Target Plus" scheme to accelerate growth of exports

* EOUs exempted from service tax.

* EOUs permitted to retain 100 per cent export earnings.

* DEPB scheme retained till replaced by a new one.

* Restrictions on importing second hand capital goods lifted.

* Validity of licences of various schemes increased to uniform 24 months.

* Import of gold of 18 carat and above allowed under replenishment scheme.

* Duty-free import of specified items for leather sector raised to 5 per cent of f.o.b. value of exports.

* "Served from India" scheme to accelerate growth in export of services.

* An exclusive service export promotion council to be set up.

Source: Business Line, September 1' 2004