No tax sops for exporters likely

The vote -on-account to be presented by Finance Minister Jaswant Singh in Parliament on February 3 is not expected to make any change in the phase out plans for exporters, under Section 80 HHC.

This may however be done in the regular Budget that the new government would have to present after the elections. Even though Commerce Minister Arun Jaitley had written to Singh to restore the full benefits under the Section, the latter is not expected to oblige this time around.

However Jaitley is expected to have more luck with his proposal to bring the drawback directorate under the ministry of commerce from the finance ministry, where it operates at present.

Singh had written back to Jaitley stating that as soon as Parliament passes the Special Economic Zone Act, the finance ministry will drop chapter XA from the Customs Act of 1962.

This chapter deals with all drawback issues, which would therefore be removed from the purview of the finance ministry.

The finance minister's assurance on the issue comes just a day before the commerce minister presents his amendments to the five-year Exim Policy on Wednesday.

Under Section 80 HHC, exporters are allowed a deduction to the extent of their profits in the calculation of their taxable income. With effect from Budget 2000-01, the deduction was sought to be reduced progressively to 30 per cent by April 1, 2004 and eliminated by April 1, 2005.

But thanks to lobbying by exporters the phase out has been prolonged and the eligible deduction now stands at 70 per cent of their profit.

The Federation of Indian Exports Organisation (FIEO) and others had asked the commerce ministry to restore the full benefits under Section 80 HHC instead of phasing it out. Both the Shome committee and the Kelkar Task Force had recommended phasing out of the provision.

In the vote-on-account, the finance ministry will present an unaltered first schedule of the Finance Bill. This will include the rates of income tax on the basis of which the revenue department will collect tax from the assesses for the first four months of the year.

It will also include amendments to the Customs and Excise Act to get Parliament's approval for all the changes in the tax rates that have been carried out.

No phase out

• The Federation of Indian Exports Organisation had asked the commerce ministry to restore the full benefits under Section 80 HHC instead of phasing it out
• Under this section, exporters are allowed a deduction to the extent of their profits in the calculation of their taxable income
• Sops will be announced during the regular Budget that would be presented after the elections