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Govt mulls sector-specific refund package for exporters

The government is considering sector-specific packages for refund of taxes and levies to beleaguered exporters, reports Gaurav Choudhury.
Hindustan Times | By Gaurav Choudhury, New Delhi
UPDATED ON OCT 22, 2007 10:35 PM IST

Stung by sustained strengthening of the rupee amid unprecedented dollar inflows, the government is considering sector-specific packages for refund of taxes and levies to beleaguered exporters.

Commerce and Industry Minister Kamal Nath said on Monday: “We are looking at measures for refund and remission of taxes to ensure that exporters get a level playing field,” Nath said before a review meeting on the plantation sector here.

The $160-billion export target for 2007-08 appears increasingly unattainable in the wake of an erosion of earnings, although the minister was optimistic about achieving the target.

Nath said the ministry was preparing a cabinet note for expanding the coverage of refunds to exporters. “The export target would be met, just as targets were met in the previous years,” Nath said.

In July, the government had announced a Rs 1,400-crore package that included cheaper bank credit, increased rate of tax refunds and faster reimbursement claims.

The government also announced concessional pre-shipment and post-shipment credit by banks for small and medium exporters and those enterprises exporting textiles, ready made garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys.

Last month, the government exempted exporters from paying tax on services rendered by ports, road transport and railways. The move may come as a relief to the beleaguered exports sector that has seen significant income squeezes as a result of the strengthening rupee.

Nath on Monday said that his ministry would review the overall situation next month in a meeting with different export promotion councils.

The government imposes 12 per cent service tax along with 3 per cent education cess on services.

The export sector grew by 18.91 per cent in August this year, a sharp drop from the blistering 41.14 per cent in the same period last year, confirming fears about the severe erosion of earnings in wake of a rising rupee.

The deceleration was starkly visible in rupee terms, where export growth fell to a measly 4.31 per cent in August, from a scorching 50.57 per cent last year.

Exports during the month were valued at $12.7 billion. During the five- month period of April to August exports grew by 18.36 per cent over the corresponding period last year and was valued at $59.5 billion.

Exporters have expressed serious concern about the erosion of earnings. Federation of Indian Export Organisations (FIEO) President Ganesh K. Gupta said about 80 lakh people could end up losing their jobs if the trend continues.

“Nearly four million people have already lost their jobs and if the government does not intervene the number could increase to eight million by March next,” Gupta said.

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