On top of the Budget 2016 expectations list prepared by exporters body FIEO’s is the demand for the government to address the inverted duty structure in certain sectors like electronics to boost exports.
In its pre-Budget 2016 recommendations to Finance Minister Arun Jaitley, Federation of Indian Export Organisations (FIEO) has also asked for creation of an Export Development Fund in order to support MSME exporters.
“The corpus of the fund should be 0.5 per cent to 1 per cent of export value so that sizable money is available to promote MSME exports,” it said.
Inverted duty structure in respect of various items in sectors like chemicals and tyre may be given due consideration in the Union Budget 2016 as it not only affects exports but also the manufacturing sector and adversely hits Make in India, it added.
An inverted duty structure impacts domestic industry adversely as manufacturers have to pay a higher price for raw material in terms of duty, while the finished product lands at lower duty and costs lesser.
“The actual refund mechanism for service tax is cumbersome and time taking which blocks the working capital of exporters. Hence, the demand of exporting community is that service tax should be exempted for exports,” it added.
The PM Narendra Modi-led NDA government may give exporting companies tax benefits on creation of employment as it will help in bringing workers into organised sector.
Exports dipped for the 14th month in a row, down 13.6 per cent in January to USD 21 billion due to fall in shipments of petroleum and engineering goods, although trade deficit showed improvement.
Imports shrank 11 per cent to USD 28.71 billion last month, resulting in a trade deficit of USD 7.63 billion, lowest in eleven months. In February last year, the deficit was USD 6.85 billion.