Exporters seek tax relief to meet global competition

Indian exporters want the government to rethink its decision to raise tax on their income by 20 per cent annually.

business Updated: Feb 20, 2003 11:56 IST

Indian exporters want the government to rethink its decision to raise tax on their income by 20 per cent annually.

Three years ago, the government had decided to phase out the exemption given on exporters' incomes by increasing the taxable amount by 20 per cent annually.

Last year, exporters were given a 10 per cent rebate because of the Gujarat violence and 50 per cent of their income was made taxable instead of a scheduled increase to 60 per cent. This year the amount is to be raised to 70 per cent.

"In the competitive global scenario where our transaction costs are around 17 per cent higher than our competitors, we are looking to the government for a rethink on raising the slab of taxable income to 70 per cent," Federation of Indian Export Organisations' (FIEO), OP Garg told IANS.

But the fact that Finance Minister Jaswant Singh has not met trade representatives or industry bodies for pre-budget talks has dampened exporters' hopes that serious thought will be given to a memorandum they submitted on the issue.

"We do not feel the government is serious about encouraging exports to achieve the goal of reaching one per cent of global trade (up from 0.65 per cent now) by 2007 as it does not reflect in their policies," said FIEO vice president, Subhash Mittal.

Exporters accused the government of not taking into account the fact that several export units are in the cottage industry sector and based outside special export zones, which enjoy better facilities and incentives.

"Why should export units outside the special zones in areas like Moradabad and Jaipur be deprived of tax benefits? It is just not possible for all export units to move out to the zones that enjoy special facilities," Mittal said.

With India's foreign exchange reserves having crossed the $75 billion mark, exporters feel that the objective of boosting overseas trade has been sidelined.

"We are not hopeful of any of our demands being conceded in the budget," moaned Garg.

India has been witnessing encouraging growth in exports this year, reversing the negative growth last year. The trends indicate that exports will end the 2002-03 fiscal with a growth of 15 per cent, up from the target of 12 per cent.

Expectations of a growth higher than this have been snuffed out in the last couple of months by fears of a US attack on Iraq, said FIEO officials.

The biggest casualties have been high-end products exported to the European Union and the US markets.

"While orders for consumer goods, handicrafts and handlooms are flowing in, there have been setbacks in the case of luxury consumer goods and high-fashion with buyers postponing plans. This year silk exports have also not done well," said Mittal, also chairman of the Indian Silk Export Promotion Council.

Despite their budget woes, exporters are happy that after nearly eight months, the government on Tuesday announced guidelines to enable them to avail of credit accruing to them for overseas trade in the form of cash or duty concessions in imports.

First Published: Feb 20, 2003 11:56 IST