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| Tariffs remain complicated with excess exemptions |
| TNC Rajagopalan / New Delhi Mar 01, 2010, 01:07 IST |
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The Budget 2010-11 has some positive messages for exporters but has very little by way of simplification of indirect tax laws.
The interest subvention of 2 per cent on pre-shipment export credit for exporters has been continued for one more year for select sectors. The finance minister (FM) has reiterated his commitment to continued growth of special economic zones (SEZ), thereby signaling a possibility that income-tax exemptions for SEZ developers and units will continue even after the introduction of the Direct Taxes Code next year.
In the Rules for Export of Services, omission of the condition that service must be provided from India and used outside India will considerably help. The notification for giving refund of unutilised Cenvat (Central Value Added Tax) Credit on account of exports has been amended to make it easy to claim refund. It is given a partial retrospective effect. All services provided within the port or airport area, whether with the authorisation of the port/airport authority or not, will now come under the service tax net.
The FM was silent on continuation of income-tax exemptions for export-oriented units beyond 2010-11, indicating an end to the exemption. That could mean migration of investment in export-oriented ventures to SEZ, during the coming year.
The FM said that all prior regulations and guidelines on foreign direct investment would be consolidated into one comprehensive document. In fact, that kind of consolidation is very badly required in the excise, service tax and Customs area. In 2001, the Central Board of Excise and Customs came out with a manual of supplementary instructions, promising to update it every year. But, nothing of the sort has happened.
The Customs and Excise tariffs remain complicated with a plethora of exemptions. Mercifully, the service tax rate remains uniform at 10 per cent but here again, the number of exemptions, abatements, inclusions and exclusions make the legal provisions much too complex. Exemptions have to be granted or withdrawn in public interest but it is difficult to see much public interest in reduction of duty in by-products of menthol, latex rubber thread, magnetrons for micro-ovens etc., or for that matter increase in duty for sanitary napkins, baby diapers and mosquito nets impregnated with insecticides.
Small units having a turnover of less than Rs 4 crore in the preceding year can take full credit of duty paid on capital goods in the first year itself, a facility that could have been given to all. They can now pay duty to the government on a quarterly basis, but will have to file quarterly returns, like the others. Plastic bottles and containers have been included in the list of packing materials bearing brand names of others for eligibility under the SSI exemption but such packing materials have to be used by the buyers as packing materials. It is difficult to see how the sellers can make sure of that?
Concessional duty rates have been prescribed under project import regulations for specified projects. These regulations are quite outdated, prescribing sponsoring authority certificate, provisional assessment and so on subjecting the importer to enormous paperwork and 2 per cent (of value) revenue deposit for a mere 3 per cent concession and making it very difficult to take the concession.
Simplification can reduce transaction costs. The FM does not seem to believe so.
Email: tncr@sify.com
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