In the past decade, a significant transformation in the finance ministry’s mindset towards exporters and importers can be inferred from various changes in the legal dispensations. To quite an extent, the field formations have also become more civil in their attitudes. Yet, there is considerable scope for improvement.
It was during the tenure of Yashwant Sinha as minister that various central excise rules were modernised. The Central Excise Rules, 2002, placed more trust on the assessees and brought in simpler procedures, doing away with outdated provisions such as statutory records, bonded store room, etc. The separate Modvat Credit Rules for inputs and capital goods were integrated into simpler Cenvat Credit Rules. The erstwhile ‘wholesale factory gate price’ concept gave way to ‘transaction value’ concept. The previous ‘Chapter X’ procedure was replaced with simpler rules. A manual of supplementary instructions was made available. The EA-2000 audit procedure placed more emphasis on desk research, rather than entry-by-entry checking. The export procedures in excise were simplified by abolishing the procedure of acceptance of proof of export. The tariff was also simplified significantly.
During Chidambaram’s tenure as minister, new Cenvat Credit Rules were introduced, allowing credit of service tax and excise duty for manufacturers and service providers. The Large Tax Payer Units scheme was introduced. Yet, the laws became more complicated during his tenure, mainly to deter tax evaders. The tariff also got messier, with the introduction of education cess, etc.
On the Customs side, India ratified the Kyoto protocol of the World Customs Organisation (WCO) on simplification and rationalisation of procedures and followed this with increased use of technology, rationalising the examination norms, introducing risk management systems and accredited clients programme, among other measures, to facilitate trade. The valuation laws were simplified, replacing the outdated ‘deemed value’ concept and giving primacy to the ‘transaction value’. But, the tariff became a lot messier, with the re-introduction of additional four per cent duty, a host of anti-dumping duties and an increasing number of Free Trade Agreements. The ‘exemption raj’ also continued, with enough discretion vested with appraisers.
Then commerce minister Kamal Nath battled hard with the finance ministry to factor in the incidence of service tax and fringe benefit tax in the All Industry Rates of Drawback and to continue with the Duty Entitlement Passbook scheme. He was also successful in giving duty credits to exporters under the Focus Market Scheme, Focus Product Scheme, etc. From a hard-fisted finance ministry, he got dispensations to refund the service tax on export of services and on services relating to export of goods. He softened the finance ministry and made it toe the commerce ministry line on the Special Economic Zone scheme. His interventions made it easier for his soft-spoken successor, Anand Sharma, to get the zero duty EPCG scheme, 1% Status Holder Incentive Scrip scheme, higher entitlements under FMS, FPS, etc, from a much-softened finance ministry to help exporters cope with the effects of global economic slowdown.
The WCO has called on Customs worldwide to celebrate 2011 as ‘Year of Knowledge’, with the theme ‘Knowledge, a catalyst for Customs excellence’. The finance ministry should take the cue and try to see how best to educate itself, its field formations and the trade in the coming days.
email : tncr@sify.com
