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The scheme, which was
extended till December 31 in the Foreign Trade Policy 2009-2014, is widely
viewed as one of the best incentive schemes by exporters.
However, with the rollout of GST, which aims to eradicate the cascading effects
of the current taxation system, the scheme may finally be wiped out from the
books.
Exporters end up paying a slew of state-level and other forms of taxes such as
electricity tax, octroi, un-rebated tax, un-rebated sales taxes, central sales
taxes, none of which is rebated at present due to the federal tax structure.
“The incentive schemes have been introduced to lessen the incidence of tax, as
taxes cannot be exported,” explained an official.
But, with GST designed to stop the cascading effect of taxes, the basis for
having the scheme would no more be there. “Therefore, DEPB might not be extended
beyond December 2010, if GST comes in as part of the Budget,” a senior commerce
and industry ministry official told Business Standard. Another official,
however, added that even if the government decided to postpone the introduction
of GST, DEPB would be allowed to lapse.
With the scheme lapsing, and even after introduction of GST, exporters will,
however, continue to pay customs duty on their import inputs, since GST would
not subsume customs duty. According to a finance ministry official, apart from
the countervailing duty, no other customs duty will be included in GST.
According to the figures released by Budget document in July 2009, the
government had to forgo an estimated revenue of Rs 7,092 crore in 2008-09 and Rs
5,341 crore in 2007-08 on account of DEPB.
Sources in the commerce ministry indicated, besides the need to shore up some
revenue by phasing out such schemes, the government was under pressure from the
developed countries at the level of World Trade Organization (WTO) to finally
stop giving the incentive.
The incentives given under the scheme are treated as direct subsidies and,
hence, it is not compatible with WTO rules. It was supposed to expire in March
2009 but in the absence of an alternative scheme, it was extended twice till
December 2009 and then till December 2010.
The country’s export sector, which had been adversely affected due to the global
economic slowdown, resulting in huge job losses across all sectors, has been
given a number of incentives to revive. It was recently given an additional
incentive, worth Rs 500 crore, to explore newer markets to sell a wide range of
products.
Recently, Commerce and Industry Minister Anand Sharma said exports for December
had risen year on year to $14.6 billion (Rs 66,500 crore) in December. In
November, exports registered an annual growth rate of 18.2 per cent to $13.2
billion, first increase after 13 months of annual decline.
Official trade data for December will be released on February 1.
Source:
Business Standard, India, dated
19/01/2010
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