Exempt Exports From VAT, Says Assocham

New Delhi, March 28: | Updated: Mar 29 2003, 05:30am hrs
Creation of virtual special economic zones, simplification of transfer pricing rules, exemption of value added tax (VAT) on exports, set-off/tax refund of service tax and deferment of the phase out of 80HHC tax benefit are the major demands the Assocham has sought from the Exim Policy to be announced by the commerce minister on Monday.

The chamber has pointed out that the current special economic zones (SEZs) legislation aims to create world-class infrastructure within a specified region.

To enjoy the benefits of this legislation, units must be located within the special economic zone.

There is therefore a need for creating a network of virtual special economic zones (VSEZs), which is similar to the concept of the current export oriented units(EOUs).

At present, all existing export oriented units can be deemed VSEZs and function under the free trade zones /special economic zones development commissioners.

These VSEZs would enjoy all benefits available to an special economic zones including fiscal advantages, freedom from administrative procedures and labour management.

The industry chamber has also stated the current transfer pricing rules are restrictive rather than enabling for exports.

It must be recognised that price fixation in world markets is subject to many variables, all of which may not be common across firms, industries or indeed, across time, pointed out the chamber in its recommendations to the government.

In view of this, we must make our transfer pricing rules less complicated. A simple solution is to increase the margin for variance from 5 to 15 per cent, and simplify the administrative and documentation procedures.

In addition, we would recommend that we first implement the simplified regime for imports, and then roll the scheme out to cover exports, the chamber said.

To be cost competitive, Assocham has suggested that the inland freight cost be reduced and benchmarked with that of China. The Centre and the states should jointly take initiatives to develop super highways and better roads connecting port, airports and industrial clusters.