FICCI seeks flexibility in Export Promotion Schemes under new FTP

16 Apr '09

3 min read

In the run-up to New Foreign Trade Policy for 2009-14, FICCI has sought flexibility in various export promotion schemes to help exporters adjust to the current liquidity crisis and also emphasized the need for bringing down the transaction time & costs by simplifying and rationalizing various procedures under the New Foreign Trade Policy (FTP).

Referring to the liquidity problems arising out of lengthy procedures, FICCI team led by Mr Rafeeque Ahmed and Mr Rakesh Shah, Chairman and Co-Chairman of its foreign trade committee who met the DGFT today, highlighted the delay in refund of VAT claims to exporters. Exporters have pointed out that VAT refund takes around 12-15 months and as a result they are facing acute fund shortages.

FICCI stated that timely refund of VAT claims would give some relief to the exporters in this crisis period. In this context, FICCI observed that India's global rank in terms of transaction cost and procedures for trade slipped by 9 positions from 81 in 2008 to 90 in 2009, according to 'Doing Business Report' of the World Bank. FICCI also demanded for refund of Fringe Benefit Tax and exempting exporters from payment of Service Tax that would be of great help to the exporting community.

The chamber emphasized the need for extending the benefits for 100% EOUs beyond 2010 by at least another 5 years, as this would lend predictability to EOUs in this time of uncertainty. FICCI urged the Government to exempt 100% EOUs from payment of Service Tax and Central Sales Tax on inputs as is the case with SEZs. On EPCG, FICCI suggested that since the peak rate of import duty on capital goods has come down to 7.5% and net saving to exporters has reduced, the Government should consider zero custom duty under the scheme, as this would encourage exporters to utilize EPCG benefits.

It observed that since the Custom's notifications are not updated on time, anomalies exist regarding criteria for fulfillment of export obligation under EPCG Scheme. Although the FTP allows shipment under Advance Authorisation, DFRC, DFIA, DEPB or Drawback scheme or incentive scheme under FTP to be counted for discharge of export obligation under this scheme, Customs notifications state that export shipments under FTP's incentive schemes would not be counted towards the fulfillment of EPCG export obligation.

FICCI said that there is a need, on case-to-case basis, for simplifying and fast-tracking the procedure of permitting Status holding EOUs to sub-contract part of their production processes abroad and send raw materials to overseas sub-contractor. They should be allowed to re-export their products by just intimating the concerned department instead of taking permissions which excessively delays the process.

At present EOUs are re-exporting their defective raw materials/capital goods which they have imported duty free after getting the permission from the jurisdictional Assistant/Deputy Commissioners of Central Excise or Customs and this takes 30-45 days for granting the said permission as compared to the prescribed norm of one day.

FICCI noted that the above-mentioned provisions will make the products manufactured and exported from EOUs more cost effective and competitive. In view of the current global economic scenario, FICCI further pointed out that the DEPB scheme which has been extended up to 31st December'09 should continue till the DEPB replacement scheme is brought into force.

Federation of Indian Chambers of Commerce and Industry

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