Sops declared for textile exporters

The government has reduced customs duty on polyester staple fibre and polyester filament yarn from 7.5% to 5% and on other manmade fibers from 10% to 5%. It also gave tax exemption on three more services besides enhancing interest subsidy to provide relief to exporters in identified sectors hit by the rupees appreciation. Sectors benefiting from the package include leather, handicrafts, marine products and textiles.

Leather, handicrafts, marine products and textile sectors are particularly hard-hit by the appreciation of the rupee. The rupee has appreciated 15% against the dollar since October 2006 spelling doom for exporters, especially those in labor-intensive sectors.

Customs duty on intermediates for PSF and PFY polyester chips, DMT, PTA (purified terepthalic acid) & MEG (mono ethylene glycol) would be reduced from 7.5% to 5% and on paraxylene (a raw material for PTA) from 2% to nil. There is no change in customs duty on nylon chips, nylon yarn, caprolactum, rayon grade wood pulp and acrylonitrile. The Centre has exempted storage and warehousing services, specialized cleaning services (fumigation & disinfection) and business exhibition from service tax.

The government will provide an additional subsidy of 2% (2% already being offered earlier) to exporters of leather, handicrafts, marine products and all categories of textiles, excluding manmade fibre, for pre-shipment and post-shipment credit. For the carpet sector, the term would be 270 days for pre-shipment instead of 180 days for other sectors and 90 days (like other sectors) for post-shipment.

The total interest subvention will be subject to the condition that the interest rate, after subvention, will not fall below 7%, which is the rate applicable to the agriculture sector under priority lending. This would remain valid from November 1, 2007, to March 31, 2008.

The allocation for reimbursement of terminal excise duty and central sales tax has been raised from Rs. 300 crore to Rs. 600 crore. Presently, 6% interest is paid for delay in reimbursement of drawback claims beyond 30 days.

The government has decided to extend a similar provision for delays in payment of terminal excise duty and CST. The process for payment of interest will be finalized shortly.

The government has already offered two relief packages to exporters, one in July and one in October. The July package, which cost the exchequer about Rs 1,400 crore, included accelerated reimbursement of TED and CST dues to exporters, interest subvention of 2%, upward revision of duty drawback and duty entitlement passbook scheme rates and service tax refund in respect of port services, transport of goods, transport by railways and other port services.

The government has already notified the following seven taxable services and the service tax paid on these seven taxable services, which are attributable to exports even if they are not used as input services, shall be refunded to exporters:

• Port services provided for export.

• Other port services provided for export.

• Services of transport of goods by road from ICD to port of export provided by a goods transport agency.

• Services of transport of export goods in containers by rail from ICD to port of export.

• General Insurance Services provided to an exporter in relation to insurance of export goods.

• Technical testing and analysis agency services in relation to technical testing and analysis of export goods.

• Inspection and certification agency services in relation to inspection and certification of export goods.

• Storage and warehousing services

• Cleaning activity services

It provided for the payment of interest on Exchange Earners Foreign Currency accounts of exporters on outstanding balances subject to a maximum of $1 million. The Centre also added four more sectors jute and carpets, cashew, coffee and tea, solvent extraction and de-oiled cake, and plastics and lanolin to the list of export sectors eligible for interest subvention under pre-shipment and post-shipment credit.