Duty Remissions Likely For Exporters, Says Nath

Commerce ministry is proposing to exempt more services from service tax.

Exporters could soon get another set of sops. The commerce ministry has prepared a Cabinet note for a slew of measures to help exporters, who have been hit by the appreciating rupee.

“We are preparing a Cabinet note to propose various schemes and outlays for exporters, so that exporters from India have a level-playing field. These will largely deal with remission of duties and are based on the principle that no tax should be exported. The Cabinet note encompasses all export sectors,” Commerce Minister Kamal Nath said on the sidelines of a meeting on the plantation sector. Nath added he was hopeful of reaching the export target of $160 billion for 2006-07.

Sources said the commerce ministry had proposed service tax exemption on more services. These include service tax paid to commissioned foreign agents, custom house agents, courier services and for overseas travel. “The finance ministry has in principle agreed to exempt these services,” said a source.

The finance ministry had earlier this month announced inclusion of general insurance, technical testing and analysis, and technical inspection and certification in the list of services eligible for service tax exemption/remission.

This followed a September announcement by the ministry that offered exemption from service tax on port services and transport of goods by road and railway containers from inland container depots to ports of export.

“The new proposals will help sectors like pharmaceuticals and textiles that spend a lot on commissioned agents,” said a trade analyst. According to estimates, service tax paid by the pharmaceutical sector on export-related activities constitutes nearly 5 per cent of the freight-on-board value of consignments.

Sources said the commerce ministry had also proposed an additional 2 per cent interest subvention of 2 percentage points on pre- and post-export credit. The finance ministry had announced a 2 percentage point cut on pre- and post-export credit in July. The average interest rate on such credit is between 8 per cent and 8.5 per cent.

Nath, who met business representatives of tea, coffee, rubber and tobacco sectors today, said sector-specific relief measures for exporters had also been proposed.

“We will see how certain government schemes could be reviewed to take into account the new emerging global competition for the plantation sector, especially from East-Asian countries,” he said.

Nath said a common carbon credit mechanism was being formulated for the plantation sector, which he said could act as an additional source of revenue.