Exporters likely to get exemption from
29 levies
After the service tax waiver, the export community may
get another windfall in the form of an exemption from
29 types of cess. The commerce department is planning
to ensure full tax exemption to exporters from all state-level
levies and 29 types of cess.
Commerce and industry minister Kamal Nath will soon
write to state governments and various other government
bodies like the Rubber Board, which imposes a cess on
natural rubber, to provide full exemption to exporters
so that they remain competitive in the international
market.
On the commerce and industry minister’s list
are the cess levied on diesel and petrol along with
little-known levies like mica cess, rubber cess, tobacco
cess and tea cess. The commerce department will also
seek exemption to exporters from the recently-introduced
education cess.
In the case of a number of farm products like spices,
cess is levied on exports. The commerce department feels
that it is not correct to let these levies persist when
efforts are being made to boost agri exports. Some types
of finished leather also attract export cess.
While exemption from each individual levy may not result
in a big-bang impact on costs, the collective impact
of relief from all the levies would act as a booster
to exporters. As of now, they do not get reimbursement
for these levies and duty drawback is restricted primarily
to excise and customs duties.
While the government has already declared its intention
to free exporters from service tax, Mr Nath is planning
to encourage state governments to scrap levies like
octroi, sales tax and electricity duty on export inputs.
The Centre will try to convince states that they would
stand to lose economic activity and employment if such
local taxes continue to deter exporters.
The current situation marks a major change in the fortunes
of exporters, who were lamenting, till recently, the
scrapping of income-tax exemption available to them
under Section 80 HHC of the Income-Tax Act.
While the basic principle of not exporting taxes was
already in practice, the Foreign Trade Policy has clearly
laid it out on paper. With the basic logic being clarified,
the commerce department plans to follow up and get all
exports free of taxes even at the state level.
The issue of central sales tax (CST) was also taken
up by the commerce department, according to highly-placed
sources. However, the issue is not being pursued since
CST is to be phased out, following introduction of the
state-level value-added tax (VAT).
Seeking withdrawal of CST at this juncture may lead
to adverse reaction from states and it is better to
let the levy get phased out according to the VAT schedule,
the sources said.
For long, exporters have been demanding remission of
state-level taxes like octroi. While the central government
has not been successful in ensuring this, sources said
introduction of state-level VAT will improve the situation.
The issue could be fully settled once the goods &
services tax (GST) proposed by the Kelkar Committee
is implemented, as the GST package involves scrapping
of all state-level taxes, excluding user charges
Source: Economic
Times, September 2' 2004
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