Govt needs to speed up policy implementation

EXIM MATTERS

In a welcome press note, the government has said there are no differences between the finance and commerce ministries on the issue concerning rebate or refund of service tax paid on various input services used for goods or services exported. The decision regarding rebate or refund of service tax was taken with the approval of the commerce minister, the finance minister and the prime minister, says the press note and goes on to give an assurance that modalities for refund/rebate of service tax on certain services that are not input services but are related to goods or services exported from India, and on neutralising service tax on services received/rendered abroad are being worked out.

It is, however, worth taking note that although the Annual Supplement to the Foreign Trade Policy was released on April 19, 2007, till now the finance ministry has not given effect to the changes through issue of fresh Customs notifications or amendments to the existing Customs notifications dealing with the relevant schemes. So, doubts do persist among exporters and importers regarding the precise implications of various changes that were announced.

The Foreign Trade Policy has now abolished the requirement of block-wise fulfillment of export obligation under the export promotion capital goods scheme. The exporters are anxious to know whether this dispensation will apply to export promotion capital goods authorisations/licences issued earlier.

The Foreign Trade Policy says under the duty-free import authorisation scheme, additional duty of Customs will be payable on imports after endorsement of transferability. The question of whether the new stipulation will be made applicable only for licences/authorisations issued after April 19, 2007 persists. Many such examples can be cited. Timely amendments to existing Customs notifications or issue of new Customs notifications consequent to the changes to the Foreign Trade Policy can easily clear such doubts.

As a matter of rule, the commerce and finance ministries should co-ordinate so that discussions and agreements on various issues precede announcements of any changes. Indeed, the Customs notifications must also be drafted and be ready for issue immediately after the announcement of the Annual Supplement to the Foreign Trade Policy.

Inordinate delay on the part of the finance ministry in giving effect to the changes announced by the commerce ministry gives rise to genuine doubts regarding whether the changes announced were discussed and agreed to between the two ministries.

The Central Board of Excise and Customs must realise that its actions speak louder than words. If the Customs, excise and service notifications are issued immediately after the announcement of the Foreign Trade Policy, there would be no need to give out press notes denying differences between the finance and commerce ministries.

In the meantime, prominent websites have reported that the President of India has given his assent to the Finance Bill 2007 and that the secondary and higher education cess of 1 per cent will become applicable on service tax with effect from May 12, 2007. The website of the Central Board of Excise and Customs is, however, silent on the issue. No Customs or excise notifications consequent to the enactment of the Finance Act, 2007 or the customary circulars explaining the changes appear on the board's website.

The Central Board of Excise and Customs must act quickly and update its websites before the others do so and try to enhance its credibility among the manufacturers, service providers, importers and exporters.

email: tncr@sify.com