Export boosters soon: Few steps likely in Union Budget | The Financial Express

Export boosters soon: Few steps likely in Union Budget

Higher tax refund rates, aid to hubs on the agenda

export, export schemes, Union Budget, Budget 2023, Budget FY24, Union Budget 2023, Nirmala Sitharaman, Modi govt, tax refund rate
Under the scheme, eligible exporters used to get refunds in the range of 0.3% to 4.3% of the freight-on-board value of the exported products.

The government has decided to initiate a raft of steps, including higher outlay for its flagship tax remission scheme for FY24 and assistance to develop various districts as export hubs, to help reverse the recent deceleration in outbound merchandise shipments.

Given the elevated interest rates, it is also weighing a proposal to increase the interest subsidy from up to 3% to 5% for pre-and-post shipment credit for MSME exporters manufacturing stipulated products. Some of the proposals could feature in the FY24 Budget announcements.

Also Read: Will it be a green Budget?

Exporters are set to gain, as the government has acknowledged “anomalies” in case of 432 products under the so-called Remission of Duties and Taxes on Exported Products (RoDTEP) scheme. Consequently, the effective refunds will rise for most of these exported products under the RoDTEP programme. The government will likely raise allocation for its flagship tax remission scheme for exporters by 10% in the Budget for FY24 from the revised estimate for the current fiscal, official sources told FE. It had budgeted Rs 13,699 crore for the RoDTEP scheme for FY23 and the revised estimate is expected to be around this level.

Under the scheme, eligible exporters used to get refunds in the range of 0.3% to 4.3% of the freight-on-board value of the exported products. The latest anomalies were identified by a government panel under former commerce secretary GK Pillai.

Similarly, a composition fee — which is slapped on traders who fail to honour their re-export commitment under the advance authorisation scheme (AAS) within a stipulated period and seek the renewal of permit — is being slashed. For instance, the composition fees in such cases used to be as much as 0.5% of the freight-on-board value of unfulfilled export obligation. However, under the new regime, the fee will be fixed at flat rates of Rs 10,000-Rs 30,000, depending on the value of the unfulfilled commitment. Under the AAS, exporters get to import inputs at zero duty after undertaking obligation to re-export finished products within a stipulated period.

Also Read: Budget 2023-24 may unveil road map for OECD’s Pillar 2

The commerce ministry has also floated a Cabinet note on a new scheme to develop select districts across the country as export hubs. Under the scheme, the Centre could extend a total assistance of Rs 3,000-5,000 crore to not just states but also eligible private players for creating export infrastructure in select districts. It is also considering extending greater outlay for the marketing of exported products overseas.

The set of proposals comes at a time when India’s merchandise exports are faltering due to a demand slowdown in top markets like the US and the EU. Goods exports shrank 12.2% on year in December, having witnessed a marginal rise in November and a steep 16.7% contraction in October, which was the first drop in 20 months and the worst since May 2020. So, any support to boost exports of goods and services, which account for over a fifth of the country’s GDP, assumes significance at this juncture.

Already, the government has stepped up efforts to ensure greater geographical diversification of exports to beat slowdown in its traditional key markets. It has also started brainstorming sessions with industry to expand the country’s product basket to cater to a wider buyer base.

The ministry has also started in-depth, product-wise analysis to identify export opportunities in markets beyond the traditional ones.

Having hit a record $422 billion in FY22, India’s exports started faltering in recent months, thanks to the Ukraine war and the interest rate tightening by key central banks that will hit growth in advanced economies. The International Monetary Fund has forecast only 0.5% growth for Europe and 1% for the US for 2023, against the projected expansion rates of 3.1% and 1.6%, respectively, for this year. The World Trade Organization (WTO) has estimated only 1% growth in global trade volume for 2023. This will weigh on the prospects for India’s export growth as well.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

First published on: 19-01-2023 at 03:40 IST