Inverted duty structure in respect of various items including Electronic Goods, Toys and Chemicals may be given due consideration in the Union Budget as it not only effects exports but also the manufacturing sector and adversely hit Make in India.
The actual refund mechanism for service tax is cumbersome and time taking which blocks the working capital of exporters. Hence, the demand of exporting community is that Service tax should be exempted for exports. At least Service Tax exemption may be provided to the following services:
- ECGC Premium, C.F.S. services, C.H.A. charges and T.H.C. Charges for exports.
- Banking Charges on collection of Bill and Foreign Currency related to exports
- Service Charges for conversion of inward remittances.
- Courier Charges for exports documents and commercial shipments.
- Service tax exemption under reverse charge mechanism as it is not rebated under all industry rate of service tax.
Terminal Excise Duty (TED) on purchase of Capital Goods from indigenous manufacturers under EPCG Scheme may also be exempted as the current refund process leads to blockage of working capital for a considerable period of time and increase transaction cost.
The biggest challenge affecting MSME exports is on the marketing front. This is because most of MSMEs lack financial resources to meet the cost. Government needs to chip in with liberal funding. The total marketing support extended by DoC under MAI and MDA is insufficient to meet the demand of MSME for export marketing. Government may create an Export Development Fund (EDF) in order to support them on this front. The corpus of the fund should be 0.5 per cent to 1 per cent of export value so that sizable money is available to promote MSME exports.
MSMEs play a pivotal role in India’s exports as well as in ‘Make in India’ Programme. In view of current downfall in exports, encouragement to MSME Sector by way of fiscal incentives on their year-on-year export growth would motivate them for aggressive export marketing, which in turn could help in restoring export momentum. Hence, MSME exporters may be provided additional exports benefits. Currently, no additional fiscal benefit is available to MSME sector under FTP.
In view of current global trend which portrays a gloomy scenario for our exports in 2016, Government may consider to encourage the Status Holder category of exporters by restoring the benefit available to them under the earlier Policies in the form of SHIS.
Withholding tax to be deducted from non-residents for exports commission payments made during course of business which is 10 per cent if PAN details of non-resident are available. If not a penal deduction of 20 per cent is to be made which has to be paid by the exporter adding to business costs/overheads. It is, therefore, requested that non-residents, may be kept out of the ambit of section 206AA.
Merchant Exporters may be given Interest Equalization Benefit (IES) Merchant exporters in specified sectors were eligible for interest subvention but they have been excluded under the current IES. In sectors such as handicrafts, carpets and agro, exports are largely carried out by the merchants who may be included in the scheme as well.
Exporting companies may be given tax benefits on creation of employment. This will help in bringing workers into organized sector e.g. If a exporting unit increases the number of workers by 50 percent and show export growth by 20 percent, it should be given a tax benefit of 10 percent (50 percent X 20 percent / 100 percent). Similarly a company showing 20% growth in number of workers and 10 percent in exports may be given 2 percent concession in income tax (20 percent X 10 percent / 100 percent).
