NEW DELHI, February 12: The commerce ministry has urged the finance ministry to continue with the 100 per cent tax deduction allowed for exporters under Section 80-HHC of the Income-Tax Act, 1961. Analysts said the move comes in the wake of projected setback for exports.Commerce secretary PP Prabhu has, in a communication to the Central Board of Direct Taxes, recommended the restoration of corporate tax-holiday available to 100 per cent export-oriented units and units set up in export-processing zones under Sections 10A and 10B of the 1961 tax act.
As per the working draft of the new 1997 Income-Tax Bill, only 10 per cent of the foreign exchange brought into the country by exporters will be tax-free under Section 80-HHC.
The commerce ministry fears the move will "affect the profitability of exporters considerably and will have an adverse effect on export-promotion efforts".
The draft bill has also sought to abolish the corporate tax-holiday facility available for five years at a stretch in the firsteight years of operation of export-oriented units and export-processing zones by scrapping Sections 10A and 10B of the Income-Tax Act. The revised bill seeks to place export-oriented units and processing zones on a par with all exporters eligible for a tax exemption of 10 per cent for all exports and 40 per cent for software exports.
The commerce ministry, Prabhu has said in his communication, has been taking up the question of tax-holiday enhancement with a view to improving the attractiveness of the export-oriented unit scheme.
Instead of enhancing the tax holiday already available, the facility is proposed to be withdrawn. This, he says, will adversely affect the functioning of about 1,500 units operating under the scheme and those under establishment. Any setback to export-oriented units and schemes will entail considerable loss to the national exchequer in terms of time, effort and money which has already gone into the execution of the scheme.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
