Don't ignore the notifications

EXIM MATTERS

Since he took over as Finance Minister in 2004, Mr Chidambaram has taken many important steps to reform the indirect tax administration. Notable among these are allowing Cenvat credit of service tax for manufacturers and excise duty credit for service providers and persuading the states to accept Value added Tax. He has moved closer to the Asean levels of tariffs for imports and rationalised the excise duty rate structure further. He has widened the service tax net and removed many ambiguities. He has given exemption for small service providers. He has also introduced the Large Taxpayer Unit scheme. He has brought in new Rules for valuation of import and export goods and enforcement of Intellectual Property Rights by the Customs.

There is one area, however, where the finance minister could have done more without any revenue implication but has not done so and that is the area of quality of exemption notifications. He could have easily got the notifications re-drafted with greater clarity and effect but has done nothing about it.

The exemption notifications relating to export promotion schemes repeat several of the conditions that are mentioned in the Foreign Trade Policy (FTP) and licences/authorisations issued under the relevant exemption schemes. The problem is that many times the texts in the notifications do not quite faithfully convey what the FTP says. The notification relating to the Export Promotion Capital Goods (EPCG) scheme is a typical example. Moreover, many times the changes effected in the FTP are not given effect immediately or not given effect at all. Many exporters trust the Commerce Minister's announcements and changes made in the FTP only to discover later that such changes have not been given effect through amendments in the relevant notifications. Is it not possible to simply state that the exemption is subject to fulfilment of the conditions stated in the FTP or licenses/authorisations, instead of verbose repetitions of the conditions in the notifications?

Many notifications are outdated. For example, the notification relating to re-import of exported goods (158/95-Cus. dated 14.11.1995) even now mandates that the re-imported goods must be subject to processes of reprocessing etc. as per the procedure laid down in Rule 173 MM of Central Excise Rules, 1944. The said Rules were done away with in the year 2001 and now the Rules that operate are the Central excise Rules, 2002. Similarly, another notification relating to re-imports (94/96-Cus. dated 16.12.1996) refers to de-logging the export entries in the DEEC (Duty Exemption Entitlement Certificate) Book, even though the DEEC book was abolished in the year 2002. Besides there are several other exemption notifications dealing with re-imports. Is it too much asking that the exemption notifications must be grouped together under a single notification dealing with all the possible eventualities?

In the era of globalisation, we can ill afford notifications that betray callousness and indolence at the top levels of tax administration. Budget is a time when many legal dispensations are reviewed and rationalised. Hopefully, this year, the finance minister will rationalise the exemptions and give good quality notifications.