Commerce Ministry wants Finmin to take up exporters' issue

The Commerce Ministry has asked the Finance Ministry to take up the issue of refunding local levies like octroi and mandi tax to exporters in the next meeting of the Empowered Committee of State Finance Ministers, slated for next month.

Exporters have been facing turbulent times due to global slump in demand and are demanding refund of state indirect taxes such as electricity duty and entry tax. These taxes add 3-5 per cent to the cost of exports.

Exporters want a mechanism for refunding state taxes to be in place till the unified Goods and Services Tax (GST) regime is introduced, which may subsume these levies.

"The (Ministry) of Commerce has written to the Finance Ministry to take up the issue in the state finance ministers' meeting," a senior commerce ministry official said, adding that the meeting is likely next month.

While West Bengal imposes VAT and electricity duty, Maharashtra, Orissa and some other states impose mandi, octroi and entry tax.      The Commerce Ministry wants state-level taxes refunded as it would help increase the competitiveness of Indian exports.

"India's exports (face the burden of) state and local levies, which for (some) products in certain states may be as high as 5-6 per cent of the cost free-on-board.

The Foreign Trade Policy should therefore announce a new scheme to (give rebate for these levies)," Federation of Indian Export Organisations (FIEO) President A Sakthivel said.     

The Foreign Trade Policy would be unveiled in August.

The Empowered Committee of State Finance Ministers, headed by West Bengal Finance Minister Asim Dasgupta, was formed when VAT was being introduced and is now working on GST implementation, scheduled for April 1, 2010.

India's exports, which are on the downslide since October 2008, managed a meagre 3.4 per cent growth rate at $168.6 billion in 2008-09.