Even as the Centre announced export relief measures in excess of Rs 5,000 crore in the past six months, exporters are still finding it hard to overcome losses due to the appreciating rupee because of absence of similar packages from states. | |
| Moreover, exporters claimed that effect of the Centre's measures was yet to trickle down to help them deal with more than 15 per cent rise in the rupee, seen over the past one year. |
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According to a study carried out by Indian Institute of Foreign Trade (IIFT), many state-level taxes, including duty on electricity, sales tax on petrol and diesel, octroi, entry tax, and even the central sales tax, which are not refunded to exporters, account for an average of 3.5 per cent on the freight on board value of exports.
| UNREBATED INDIRECT TAXES/DUTIES | | State | Central sales tax | Electricity duty | Sales tax on
petroleum products | Andhra
Pradesh | 3% with C form, otherwise local VAT rate | 25 paise per unit | Petrol - 33%
Diesel - 22.25% | | Gujarat | 3% | 40 paise per unit | Petrol - 26%
Diesel - 24% | | Maharashtra | 3% | 8.5% of energy charge,
electric cess - 10 paise
per unit | Petrol - 29% Mumbai,
Navi Mumbai, Thane
30% rest state
Diesel - 34% Mumbai,
Navi Mumbai, Thane
31% rest state | | Karnataka | 3% | 5% | Petrol 28%
Diesel 20% | | Haryana | 3% | 38 paise per unit;
5 paise per unit
(Municipal Corp Tax) | Petrol - 20%
Diesel - 12% | | (Source: Federation of Indian Export Organisations) |
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| "This amounts to a significant amount for exporters. Going by total merchandise exports of nearly $126 billion seen in 2006-07, exporters would have paid states taxes worth $4.4 billion which were nor reimbursed," said a Delhi-based trade expert. |
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| Significantly, Commerce Minister Kamal Nath had recently said the tax would have to be either refunded by the states themselves, or be paid by the Centre and then adjusted against the allocations to the respective states. |
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| "State taxes contribute 15 to 20 per cent of products like photo frames, lamps and embroidery items, which my company manufactures. This is a significant component of my export turnover, which has already taken a hit in excess of 15 per cent due to the appreciation in the rupee," said |
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| RK Malhotra of Gurgaon-based Asian Handicrafts. |
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| In states like Uttar Pradesh, dogged by power shortage, the industry has to depend on captive power plants which require diesel. |
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| "In addition to the cost of diesel, I also have to pay duty on it. Also, for the electricity connection, there is a minimum usage charge, on which duty has to be paid. These duties are not refunded and adds to my costs," said Sat Pal, managing director of Globe Metal Industries in Moradabad. |
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| Exporters also claim they have had little benefits from export relief measures like an export credit interest rate subvention by four percentage points, reimbursement of service tax on nine services as well as increase in duty remission schemes like duty drawback and duty entitlement passbook scheme. |
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| "We need bank credit in dollars while public sector banks are providing it in rupees. Since our transactions are in dollars, a rupee-based loan will lead to losses. We have not benefited from the measure announced by the finance ministry," said Sanjay Kothari, chairman, Gems and Jewellery Export Promotion Council. |
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| Exporters like Malhotra claim that measures announced by the central government over the past six months have helped him tide over only 0.5 per cent of his losses. |
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| Moreover, small exporters claim that the transaction cost and hassles for filing service tax exemption makes the benefit unviable. |
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| "For small exporters, who have an annual turnover of not more than Rs 20 lakh, the transaction cost and other expenses for filing service tax benefits are almost equal to the exemption itself. Hence, many of us usually have not filed for exemptions. Moreover, service tax exemptions on many other important services are yet to be announced," said Atul Saluja of Encore Exports, who has his unit manufacturing paper-based decorative products in Noida. |
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| On an average, service tax accounts for around 2 per cent of the freight on board value of exports. |
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