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Exporters find Budget taxing
March, 03rd 2007

Budget 2007 did not have much to offer for the export sector, feels the export community. While exporters have welcomed the reduction in customs duties for key inputs, especially for the textile and gems & jewellery sectors, there is disappointment over imposition of minimum alternate tax (MAT) on Section 10A & 10B and continuation of imposition of services tax on the exporting sector.

Exporters, however, have appreciated liberalised export procedures announced by the RBI recently, arguing that it would serve to reduce transaction costs.

According to the Delhi Exporters Association (DEA), despite promises made by the government on exempting exporters from service tax, no such move has been made in the budget. The only demand that has been met by the finance minister is exempting exporters from tax on services availed outside the country. There are about 25 different heads on which exporters are paying service tax. That is why our transaction and other input costs are increasing by the day, DEA president S P Agarwal said.

According to Federation of Indian Export Organisations (FIEO), reduction in customs duty on key inputs would reduce manufacturing costs and thereby exports particularly of thrust sectors like textiles and gem & jewellery.

The organisation, however, expressed its disappointment at the imposition of MAT on Sec. 10A & 10B which would affect IT exports and exports from export oriented units. It also criticised the imposition of service tax on outsource services and on works contracts.

The RBI announcements on liberalised import procedures brought more cheer to the exporting community than the budget. Fieo president Ganesh Kumar Gupta pointed out that the delegation of powers to authorised dealers to extend the period of realisation of export proceeds beyond 6 months from the date of export, up to a period of 6 months at a time irrespective of the invoice value subject to laid down criteria was a good move. It would help reduce the paper work required to be done by exporters and save time.

This flexibility would not only reduce the transaction cost but also ensure that deferred terms of credit are provided to small exporters with lesser invoice values. FIEO also appreciated the move of extending the write-off facility to all exporters including status holders subject to certain conditions which have been rationalised.

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