The Federation of Indian Export Organisations on Wednesday asked the Government to exempt deemed exports from terminal excise duty and sales tax to ensure availability of sufficient funds to the exporters.
"Exporters first pay excise duty on domestic supplies considered as deemed exports which is refunded by the DGFT. This results in suppliers' funds being blocked raising their transaction costs. Such practice should be done away with," FIEO president M Rafeeque Ahmed said.
By exempting deemed exports from terminal excise duty, the Government can reduce the burden on exporters, Ahmed said in a statement.
Instead of excise duty, Government can take a bond or a bank guarantee from exporters which can be discharged when they give a proof of receipt of material, Ahmed suggested.
The FIEO chief also favoured scrapping of central sales tax on supplies from Domestic Tariff Area (DTA) to 100 per cent export-oriented units. This was already being done in the case of supplies made to SEZ units, he added.