Commerce and Industry minister Kamal Nath on Thursday said that the government is drawing up a mechanism for refund of taxes to exporters levied by the State Governments to make exports more competitive.
While addressing delegates at 102nd Annual Session of PHD Chamber, Nath said that that the state governments should be sensitized about the benefits they would accrue in terms of attracting more investments and generating more employment by augmenting exports.
"While we have to see that taxes are not exported, the Centre cannot refund state level levies and taxes. We are working on a mechanism to give exporters some amount of benefit by refunding what has been paid by the producers," he said.
Speaking at the function, Nath said there has to be a competitive atmosphere between states. "States have to attract investments by good governance. The business community is sometimes too Central Government centric. We have to ensure that state governments are sensitised in the process," he said.
Finance Minister P. Chidambaram had echoed similar opinion at the National Development Council ( NDC) meeting on Wednesday and said that exports are under some stress due to rapid appreciation of the rupee against a weak dollar.
"At present, number of taxes including value-added tax, octroi and electricity duty are borne by exporters…I would urge state governments to look into this issue carefully. Any state which relieves exporters of tax burdens stands to gain - more export-oriented industries will locate in that state. Hence, it is in the long-term interest of the state to rebate or refund all taxes on exports,” Chidambaram had said.
The Centre has already extended about Rs 5,200 crore relief packages to exporters battered by a persistently rising rupee.
Nath said that the second tier of reforms should be related to the governance. “With the accelerated growth in the first phase of reforms, it is necessary to take up such issues for change of mindset of the people. State level participation in this phase of reforms is important. The second phase of reforms he said should address food and fuel challenges since India is presently in a paradox of affluence in the midst of poverty”, he said.