Finance Minister Pranab Mukherjee is expected to dole out some subsidies to exporters in Budget 2011-12, despite urging them not to expect major incentives.
The ministry, according to sources, will give relief to exporters through a mechanism that will enable a timely refund of credit balance in the Cenvat account and time-bound refund of additional duty of customs (ADC), among others.
“Difficulties in getting refund of service tax and refund of accumulated Cenvat credit are likely to be addressed in the Budget, while the ministry is also looking at giving respite on the ADC front,” a senior commerce department official told Business Standard.
According to the present norms, Cenvat credit was being allowed in respect of excise duty paid on inputs by exporters.
“Looking at the government’s position and this being the last year of the 11th plan, I doubt if there is going to be any significant announcement. However, certain streamlining of tax and duties would also help without resulting in revenue loss,” said Ajay Sahai, director general and CEO, Federation of Indian Export Organisations.
“Exporters had been facing severe problems of accumulated Cenvat credit primarily on account of sharp reduction in excise duty from 16 per cent to eight per cent and then again to 10 per cent,” he said.
The finance ministry is reportedly working on a method to refund ADC to exporters at the time of export, similar to what was done when it was known as special additional duty (SAD). ADC of four per cent is levied on imported goods to countervail incidences of local levies like VAT or CST.
Exporters have constantly complained of problems caused by customs EDI systems and redundant paperwork required for the online system. According to exporters, numerous claims for refund had been lying for years and some had been rejected without a basis.
The government is also likely to introduce a uniform rate to ease refund of service tax. The finance ministry, it has been learnt, will introduce a mechanism that would allow an all industry service tax rate for different product groups, as is the case with all industry duty drawback rate. Total exports during the April-January period registered a growth of 29.4 per cent year-on-year to $184.6 billion, while cumulative imports rose by 17.6 per cent to $273.6 billion.
Earlier this week, the ministry of commerce and industry provided relief of Rs 507 crore to 617 selected products. It also unveiled a series of measures, last week, to help reduce transaction costs of all exporters by about Rs 2,100 crore.
