According to sources, finance ministry wants rationalisation of the tax incentives for exports within the framework of World Trade Organisation.(WTO) The ministry, in its view communicated to the commerce ministry, has also underlined the need for preventing misuse of incentives for exporters as it has become a major source of revenue leakage.
The Union Budget has already tackled the issue of rate rationalisation and reduction of peak customs duty rate from 30 per cent to 25 per cent. Provisions related to income tax deduction in case of special economic zone (SEZ) has also been rationalised.
On the issue of schemes for export promotion, officials pointed out that it had become difficult to administer multiple schemes such as drawback, DEPB, advance licence, DEEC, DFRS, EPCG, and EOU/EPZ/SEZ. They are also being misused by exporters. There is a need for rationalisation of these schemes, the official said. Sources added that besides streamlining the number of schemes the meeting would also discuss the issue of administrative transparency of the export promotion schemes.
The Kelkar Task Force (KTF) report on indirect taxes has given a roadmap for export scheme rationalisation and stated that the export strategy should focus on schemes for SEZs and EOU, advance licensing scheme and drawback scheme.
In the case of SEZs and EOUs, it suggested, duty exemption on capital goods, raw materials should be given to units for their export production. The benefits of advance licensing scheme should be limited to actual users on capital goods, raw materials used for export production subject to post-clearance intelligence and audit-based verification, according to the report.
The drawback scheme should be continued and the relief from duties on inputs, raw materials, capital good would be provided through a mechanism of the duties paid, the report had stated. It also recommended that the Central Board of Excise and Customs (CBEC) should work out a mechanism to formally associate a representative of the Ministry of Commerce in the process of fixing the all industry rates of drawback.