The Hindu Business Line : Budget wish-list: FIEO demands package for rupee-hit SME sector

New Delhi, Feb. 8 In the run-up to the Union Budget 2008-09, the Federation of Indian Export Organisation (FIEO) has rolled out a raft of export relief measures to stem the decelerating growth in the country’s exports and accord impetus to the export segment reeling under the relentless rise of the rupee against the US dollar.

In a statement issued, the FIEO President, Mr G.K. Gupta, said the slowdown in export growth was attributed to the rising rupee, which went up by 13 per cent over the past six months, with the sharp rise hindering exports from the SME sector and impacting their lean margins severely.

Tax sops

There is, therefore, a need to customise a package for the SME sector by providing, among others, tax incentives to the manufacturing export sector to move up the value chain (as in Sec 35 (B)) or creating an ‘export profit reserve’ for expansion/R&D.

Extending Sections 10A & 10B of the Income Tax Act, 1961 to all exporting units, whether merchant or manufacturer exporters; extending the provisions of Section 10BA to other sectors such as artware, textiles, made-ups, handmade carpets, stone and glass articles and others in the small and cottage sectors.

Basic customs duty exemption on capital goods imported under EPCG scheme; exempting exporters from payment of customs duty on capital goods imported under EPCG scheme; rebate of duty paid on exported material; service tax: ambiguities such as non-availability to manufacturer exporters not registered with the Excise Department unable to take exemption/refund.

Refund mechanism

For exporters who are not registered with Excise Department (manufacturer exporters), there is no mechanism for refund of input services not used in the manufacture of goods or output services such as commission to foreign agents and warehouse charges.

Also, the small manufacturers who are either in non-excisable sectors or are exempted from the purview of excise duty have to bear the incidence of service tax paid during the course of exports. Levy of service tax affects competitiveness of exporting units and therefore they must be exempted from paying the same.

The exporting community suggests ab-initio exemption from payment of service tax on notified services. Such an exemption can be subjected to random scrutiny of account. This will also establish the trust which the Government places on the exporters.

CENVAT Rules

Moreover, the refund of output service tax may also be allowed under the existing CENVAT Rules 2004 to dispense with the need to apply for refund. This may require some modification in CENVAT Rules which needs to be carried out immediately so that the processes become simpler and automatic.

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