Remove cloud over duty credit norms

EXIM MATTERS

The annual supplement to the Foreign Trade Policy gave the export houses what they had been waiting eagerly for since last year.

The government notified the forms and procedures for claiming duty credits under the Duty Free Credit Entitlement Certificate (DFCEC) scheme and Target Plus scheme. The export houses have to wait for some time for clarifications because some of the provisions are not too clear.

Under the DFCEC scheme, export houses are eligible to claim 10% of the incremental exports during the year 2003-04 over the year 2002-03, provided they have achieved a 25% incremental growth during the period, subject to a minimum of Rs. 25 crore.

Under the more liberal scheme, Target Plus scheme which rewards incremental growth during 2004-05 over 2003-04, even a minimum export performance of Rs. 10 lakh and a 20% incremental growth is enough but duty credit entitlements vary from 5% of incremental exports to 15% of the incremental growth.

The Policy says that high perfuming export houses will be rewarded through duty credit entitlement based on incremental exports.

The Customs notification also says the reward is based on incremental growth in the FOB value of exports made during the financial year 2004-05 over the exports made during the financial year 2003-04.

The declaration annexed to the form for applying for the duty credits under the Target Plus scheme, however, calls for a declaration from the applicants that the applications is based on export realisations during the period 2004-05 and 2003-04.

This is a serious anomaly and needs to be corrected or clarified quickly. The provisions relating to the entitlements of group companies (Para 3.7.4 of the Policy) are worded very confusingly.

The government should revisit these provisions and amend the provisions or issue suitable clarifications.

The Target Plus applicants have to back up their statements and declarations with chartered accountants' certificates but even so, they have to submit self certified copies of the shipping bills for each shipment made during the year 2004-05. In case of some exports, this would mean submission of thousands of shipping bill copies.

Last month, the government amended the policy to effectively deny the benefits for the exports of studded jewellery. The amendment has now been made effective from 1st April 2004.

This means that whoever exported studded jewellery in the hope of getting duty credit entitlements under the Target Plus scheme will be submitted.

The Government has explicitly (Para 3.7.8 of the Policy) taken the power to amend the policy in such a manner as to exclude export of any products or any category of exports from the calculation of incremental growth or entitlement under the Target Plus scheme.

Also, the government may at any time in the future, disallow import of any products under the duty credits granted under the scheme. Similarly, the government has reserved a right to change criteria or entitlement under the scheme.

The specific provisions under the policy allowing the government to change rules of the game at a later date do not speak well of the confidence of the government in the robustness of the scheme.

Businessmen expect the government to think through and announce schemes on the basis of which they can extend commitments and conduct their business. The government should quickly end uncertainties about the schemes.

tncr@sify.com