Engg goods exporters pitch for tax sops, simpler rules

Exporters of engineering goods, which contribute over 40 per cent to the country’s total exports, have urged the central government that incremental exports be exempt from tax for three years, with the base year being 2008-09.

This has been necessitated as engineering exports have witnessed a considerable decline in the current financial year and a turnaround seems unlikely in the next one or two years.

The exporters have also demanded that the expenditure on overseas establishments be given a weighted deduction of 1.5 times, for three years. Similarly, to incentivise research and development (R&D) in engineering industries, the expenditure incurred be given a weighted deduction of 1.5 times.

In a pre-Budget memorandum to the finance ministry, EEPC India (erstwhile Engineering Exports Promotion Council of India), a representative body of engineering exporters, has made a strong pitch for increasing the general rate of depreciation on plant and machinery to 25 per cent from 15 per cent in a bid to encourage micro, small and medium enterprise (MSME) units to undertake fresh investments and create demand for capital goods in the country.

Further, in case of replacing obsolete technology and investment in new international environmental standards, particularly those stipulated for the EU and US markets, these investments be given a 100 per cent depreciation.

EEPC India Chairman Aman Chadha told Business Standard the import duty for capital goods should be raised to 10 per cent and the import duty for raw materials, especially pipes and tubes, be reduced to 7.5 per cent, saying this would help domestic manufacturers immensely to compete with their foreign rivals.

Chadha also said the government needed to simplify tax procedures for exporters. “At present, an exporter has to go through 24 steps to get tax benefits. It is possible to reduce the number of steps to 11, by ensuring multiple documents are replaced by just one document such as the ‘Excise Invoice’, which is accepted by all agencies and authorities as documentary evidence. Thus, the excise invoice could be also used as the shipping bill and for the benefit of export promotion schemes,” he noted.

Chadha said one of the greatest problems for exporters is the maintenance of three records each on excise, education cess, secondary education cess, service tax, education cess on service tax and secondary education cess on service tax. “If the government wants tax, then it can easily club all three and charge a little extra on invoices as excise.”

On recovery of service tax, EEPC said 10.3 per cent service tax is levied on participation charges in exhibitions and other promotional events. It has suggested the rate be brought down to zero.

Further, EEPC has called for making Cenvat credit more flexible. Service providers cannot take credit on the four per cent additional duty. Manufacturers can, but may not use it for paying service tax. And, refund of the additional duty can be taken in case imported goods are resold, but the documentation needed is onerous.