Commerce Ministry to discuss tax policies, labour laws with Modi

Uncertain taxation policies with regard to SEZs, harsh labour laws and failure to improve export competitiveness are among the issues which will be highlighted by the Commerce Ministry in its presentation to Narendra Modi after he takes over as Prime Minister next week.

Commerce Secretary Rajeev Kher has already apprised about his power-point presentation to Cabinet Secretary Ajit Seth yesterday.

"Uncertain taxation policy for Special Economic Zones (SEZ) has impacted the performance of units in those zones. Exports and manufacturing activities have come down from SEZs. Labour laws too are hitting manufacturing sector's growth," sources said.

In order to boost the country's exports, the Commerce Secretary's presentation to the new Prime Minister would talk about enhancing competitiveness and setting up of standards for Indian products.

India's exports in the past three years have hovered at about USD 300 billion. The policy is aimed at boosting overseas shipments and enhancing its share of world trade.

Exports in 2013-14 increased to USD 312.35 billion but fell short of the target of USD 325 billion. Overseas shipments stood at USD 300.4 billion in 2012-13 and USD 307 billion in 2011-12.

"Indian exporters need to drastically enhance their competitiveness and standards of products to boost exports," they said, adding that despite the fact that services sector contribute over 50 per cent, India's services sector export is still not in good shape.

Industry has time and again complained that the minimum alternate tax (MAT) and the dividend distribution tax (DDT) on SEZs have dented the investor friendly image of these special zones.

In 2011, the government had imposed MAT of 18.5 per cent on the book profits of special economic zone developers and units.

During 2012-13, SEZs have attracted a total of Rs 2.36 lakh crore investment and provided direct employment opportunities to over 11 lakh people.

Exports from special economic zones grew by about 31 per cent year-on-year to Rs 4.76 lakh crore during 2012-13.

Kher is also expected to brief the new prime minister on the issues related with WTO and free trade agreements (FTAs) which India is currently negotiating including Regional Comprehensive Economic Partnership (RCEP) .

All the secretaries are likely to give their presentations to Modi next week.