The Union Finance Minister, Mr P. Chidambaram, on Monday turned down FICCIs plea to restore temporarily the tax exemption on export profits to offset the adverse effect of appreciating rupee against the US dollar.
In his post-Budget interaction with industry associations, Mr Chidambaram said that Section 80HHC, an earlier provision in income tax law that provided tax exemption on export profits, could not be restored as it was WTO incompatible.
I disagree with your suggestion that 80HHC should be restored. Section 80HHC was abolished in 2004, as it was WTO incompatible. All profits must be taxed. There is no reason why profits should not be taxed. We are not taxing losses. The effective tax rate is only 20.6 per cent. You get to retain the balance, Mr Chidambaram said. Stating that the export sector needed deeper look, the FICCI President, Mr Rajeev Chandrasekhar, suggested that the Government must waive tax on all services used by exporters, restore 80HHC temporarily and do away with MAT for exporters for two years.
He said that the exporting fraternity needs more assistance.
THE NANO EFFECT
Stung by the Governments move to drop excise duty on small cars to 12 per cent, two-wheeler makers, including Bajaj Auto and Hero Honda, on Monday urged the Finance Minister to further lower the excise duty on two-wheelers to 8 per cent from the Budget announced level of 12 per cent.
It is not enough for excise duty on two-wheelers to be brought to 12 per cent, the same level as small cars. Please reduce the excise duty on two-wheelers and three-wheelers to 8 per cent. While car industry growth has slowed from double digit growth levels, in the case of two-wheelers, there is negative growth this year. So further cut in excise is needed for two-wheelers, Mr Rahul Bajaj, Chairman, Bajaj Auto, said at the meeting.
The Finance Minister pointed out that the excise duty rate has been pegged at the same level for both two-wheelers and small cars in the last two to three years. I have brought down the excise duty on small cars to 12 per cent from 16 per cent. The same treatment has also been given for two-wheelers and both are now at 12 per cent. The direction is same. I will bear in mind (your suggestion), Mr Chidambaram said while responding to Mr Bajaj.
The Rs 1-lakh small car Tata Nano to be launched in September will now attract 12 per cent excise duty.