A few days before the Independence Day, the finance ministry released the draft Direct Taxes Code that intends to free the taxpayers from the clutches of tax experts, consultants and fixers. The commerce ministry should, likewise, try to free the importers and exporters from the clutches of unscrupulous elements in the licensing offices and intermediaries.
It was when Mr N L Lakhanpal held charge as Director General of Foreign Trade (DGFT) that a number of initiatives were taken to make the life of exporters easier. The
DGFT before him, Mr Shyamal Ghosh, tried his best to bring about change in attitudes of the staff. But, for the last 6-7 years, the focus is more on giving subsidies rather than reducing corruption or transaction costs. The exporters have to now contend with more paperwork and more demands for bribes in the licensing offices than earlier.
In the new Foreign Trade Policy (FTP), Commerce Minister Anand Sharma should, besides aiming to dramatically reduce the role of the licensing offices of the DGFT, take a closer look at the ‘reward schemes’ in Chapter 3 of the FTP. He should remove some restrictions in the schemes that are not quite rational.
The stated objective of the Focus Market Scheme (FMS) is to help the exporters cope with high freight cost and other externalities to select international markets with a view to enhance our export competitiveness in these countries. However, the entitlement of 2.5 per cent of the FOB value of exports is not available for exports made by export-oriented units (EoUs) who avail direct tax benefits or exemption. It must be recognised that even EoU and units in Special Economic Zones (SEZs) suffer the same freight disabilities that other exporters do.
There is no reason why the exports made in discharge of export obligation against the Export Promotion Capital Goods (EPCG) scheme should not be eligible for Chapter 3 benefits and vice versa. The FTP prescribes no restriction on such benefits. But the Customs exemption notification no. 64/2008-Cus. dated May 9, 2008, prescribes the restriction. It is the job of the commerce ministry to take up such matters with the finance ministry and get the restriction removed.
The Served from India Scheme (SFIS) encourages export of services by granting duty credits at a certain percentage of foreign exchange earnings. However, the SFIS duty credit is not transferable, except to managed hotels and group companies in the hospitality sector. So, many service providers are unable to utilise the SFIS duty credit scrips. The new FTP should allow free transferability of SFIS scrips. If need be, this may be an alternative scheme that gives lower entitlement. Such transferable scrips should allow import of all freely importable goods to make it easier to sell the scrips.
The SFIS scrips can be used to avoid excise duty payment on domestically procured goods through exemption notification no. 34/2006-CE dated June 14, 2006. However, the supplier who works under the Cenvat Credit scheme will have to pay 5 per cent of the value of the goods as per Rule 6(3) of the Cenvat Credit Rules, 2004. Till recently, using the SFIS scrip to avoid excise duty payment entailed payment of 10 per cent of the value of the goods, whereas not using SFIS scrip meant paying 8 per cent excise duty!!
The commerce minister should give meaningful Independence Day gift to exporters by liberating them from unwarranted hassles and paperwork.
Source : Business Standard