This part of the year is famous for churning out presentations to be made or to hold pre-Budget discussion with the Finance Minister, making suggestions as to what the Budget should consider and provide for. Each of the trade bodies, both limited to the garment export sector and the national ones made their wish-list known to the Finance Minister for his consideration. The general tone and tenor of these presentations was to seek and ensure keeping the stimulus package intact. It was not without reason. The fact that though we have recovered from the global economic slowdown, new challenges have emerged that a posed a challenge to maintaining the current growth rates. New and formidable combination of various factors like slow recovery of the developed economies, rising inputs costs, tight liquidity conditions and rising interest rates do pose a threat to our present and prospective growth. There was an apparent need for the industry to make a demand for continuing stimulus package, which the Government is reported to have inclination to withdraw. Their major thrust is for the Budget Proposals for 2011-12 should, according to industry, be to maintain and even accelerate the pace of economic recovery and step up employment generation.


A major commonality that one found in the presentations made by various trade bodies has been that they are not so much keen on expansion beyond the stimulus package in as much as they insisted on the implementation of what has already been declared. This is, however, not to suggest and some of them have been found wanting to demand more, but their demands were neither very much heavy nor probably had the emphasis which has been a regular feature with them all along.


I also observe that the presentations made by trade bodies have not been confined to a given set of recommendations, for, their recommendations despite some of their commonalities had a wider canvas, covering new areas which were not their demands earlier. This is as natural as the circumstances and their demands have changed in the fast evolving scenario. Also the specific recommendations need to resonate with the requirements of their members.


I feel it would be more appropriate that the recommendations being made by different trade bodies to the Finance Minister should be dealt with individually for each trade body rather than on the basis of the areas that are common.


CITI


Shishir Jaipuria, President of Confederation of Indian Textile Industry (CITI) which represents all the sub-sectors in the textile and clothing industry and also the textile machinery industry covered a wide spectrum of textile sector, as a whole. Among the more important recommendations made by him included abolishing import duty of all man-made fibres; optional Excise duty for textile products needs to be continued at a uniform rate of 4 % for all products irrespective of the fibre content; Excise duty on man-made fibres should be reduced to 4% and all anti-dumping duties on man-made fibres may be withdrawn and no fresh anti-dumping actions may be considered. He felt that these measures will increase consumption of man-made fibres in the country and will help immensely in the growth of the textile and clothing industry. He also appealed the Government for refund of accumulated Cenvat credit which has accumulated mainly because of an inverted duty structure that prevailed in the past. He suggested this refund as one-time measure to rectify this situation. He also pleaded for exemption from Customs and Excise duties for all liquid fuels used for captive power generation, in view of continuing power shortage in most of the textile producing areas in the country.He felt that Customs and Excise duties on textile machinery, components and spares should be withdrawn to enable Indian textile industry to produce world class textiles. He underscored the need for to restore the Technology Upgradation Fund scheme, which has been suspended following utilization of funds allotted for five years in just 3 years.

 

Then, he felt there is a strong need for provision of working capital for cotton, against a margin of 10% instead of the current 25%, at an interest rate of 7% as against BPLR at present and for a period of 9 months as against the current 3-4 months. On the export front, he said Drawback rates for all other textile products reduced substantially earlier this year may be restored immediately, since textile products are facing tough competition in global markets and all our competing countries are extending substantial benefits on exports of textiles products. In the case of technical textiles which are a thrust area with substantial export potential, DEPB/drawback benefit are not available for several products. It is requested that technical textiles may be listed as a separate group for the purpose of DEPB/drawback and suitable rates may be announced for all technical textile products. Other requests made include keeping fabrics outside State VAT even after operationalisation of GST.


According to Rakesh Vaid, President, GEA, the basic objective of the budget should be to make exports competitive as well as profitable, as the rising raw material prices are the most important factors adversely affecting the export potential of garment exporters. GEA would also like the Government to reduce corporate tax rate. The wish-list of GEA from the Budget included are to hike duty drawback rates by 5 per cent and to increase the scope and coverage of duty drawback scheme so as to ensure full reimbursement of excise duties, custom duties, service tax, education cess and various state level taxes. He has urged to provide adequate and need-based funds to exporters at reasonable rates of interest which should not exceed 7 per cent as applicable to agriculture sector and restore 4 per cent interest rate subvention on export credit. He has also sought the restoration of 100% exemption to export earnings under Section 80 HHC of Income Tax Act at least for the next five years. He said in view of acute power shortage, Government should encourage captive power generation by providing diesel at International prices and exempted from Excise Duty and Local Levies, apart from seeking exemption from Service Tax all the export related services to avoid blockage of capital of exporters, as the procedure for refund is time-consuming, resulting in unnecessary delays and harassment. He added that GEA would like the Government to implement GST (Goods & Service Tax), at the earliest. Another recommendation seeks the abolition of Customs duty on import of textiles machinery, accessories and fabrics apart from manmade fibres. He felt that the Central Government should also arrange refund of State Levies on exports, amounting to 6% of f.o.b. value. His other recommendations include: duty-free import of tailor dummy (HS Code No.9618 0000) and Security Tag /Fish Hard Tag (HS Code No. 85437019). He underscored the need for action on the part of Government to reduce the transaction cost by simplifying administrative procedures by avoiding delays at customs clearance of goods and improving loading and unloading of cargo and infrastructure at ports.


FIEO


The newly elected President of Federation of Indian Export Organisations, Ramu S. Deora, who spoke "on behalf of the export fraternity of our country" in Pre-Budget meeting with Finance Minister said India should become a major part of international trade with our share of 1.52% of global trade should be enhanced to 3%. An optimist Deora declared that while the Government is contemplating an export target of $ 400 billion by 2014, we are optimistic that we can touch $ 500 billion, provided infrastructure is made available to cope with the multi-fold increase in exports. While appreciating the Government has taken declared meaningful policies, but their implementation at the ground level requires sea change in strategy, requiring systemic improvement in a number of areas like simplification of procedures, reduction in paper-work, clarity on policies, quick decision for litigations, reduction inn transaction costs, quick grants of refund where due, greater coordination between various Government agencies and vast improvement in infrastructure.

He alleged that Government policies are unclear with reference made to various old circulations, notifications, amendments etc. leading to varying interpretations and conflicting decisions being taken by Government authorities and courts and suggested to away with all old notifications and circulars and issue of new simple and clear policies. He also suggested that there should also be a high power executive under Finance who should be responsible for only all export related issues. While welcoming introduction of online system for various statutory and other requirements, making online payment of tax/duty possible for Income Tax, Customs, Excise and VAT, but refunds are not made online due to which the exporters have been suffering. Further some sites are not working or are under maintenance e.g. DGFT AND Customs website at times are not functioning and problem of 1.5 version has not been addressed fully. He also recommended that Service tax refund should make to industry rate. He recommended that Ministry of Finance can alternatively work on a mechanism to allow is an ideal situation. The Government of India should work on a mechanism to allow all India industry Service tax rate for different product groups like with all industry duty drawback rate. Exporters who are not satisfied with the All Industry Service tax rates can always apply for refund on actual basis like Brand Rate of Duty Drawback.


He added that while CENVAT credit can be taken as soon as goods are received in the factory, the Basic Customs Duty paid on raw materials imported for manufacturing should e allowed for direct credit against export of finished product as per actual consumption. Taxation of DEPB is under consideration of various courts, which can be avoided if CBDT issues a clarification that no income ax will be levied on the profit received from the sale of DEPB up to its face value. However, if any exporter has sold the DEPB on premium, the premium amount should be subjected to applicable taxes. He also stated that provision of tax deduction at source (TDS) is not applicable to commission paid to foreign agents. However, Income tax authorities are not accepting the above plea and are raising demands resulting in unnecessary litigation. He also pleaded FOR Income tax benefit available to EOUs should be extended till 3e1.3.2014. He also recommended that the Interest subvention scheme should continue for one more year beyond March 31, 2011. He said there are no separate guidelines for SMEs including proprietor and partnership companies and the rating criteria do not allow such companies to get Good rating only because of the nature of the organization. He concluded by saying that while FIEO welcomes GST, which will impact export promotional schemes, he would urge that a 6-12 months transition period be provided for , for a smooth switchover to th4 GST, while simultaneously protecting the interest of the exporters.


Rajan Bharti Mittal, President, FICCI, has urged the Union Finance Minister Pranab Mukherjee, to tailor the direct and indirect tax measures in the ensuing Union Budget to support domestic demand and ensure that there is no roll back of the stimulus measures at a time when the global economy is still not out of the woods. He, in his pre-Budget meeting with the Finance Minister, emphasized the need for incentivizing employment generation in industry and suggested abolition of surcharge and education cess, moderation of the corporate tax rate, removal of the cascading impact of Dividend Distribution Tax, rationalize MAT as a specified percentage, retention of the peak customs duty rate of 10%, reduction in the CST rate from 2% to 1% with effect from 1st April, 2011. He also suggested that suitable mechanisms be evolved for expeditious refunds of service tax, SAD as also cenvat accumulations, which cannot be modvated. He also wanted the Government to find out a way forward expeditiously to end the current impasse about the Goods and Services Tax (GST), which was being awaited. He also expressed his apprehension that too many compromises might not dilute the underlying objective GST.

 

Hari Bhartia, President, CII has suggested a set of policy measures to sustain the current growth momentum of the economy and stressed that even though we have recovered from the global economic slowdown, new challenge have emerged that pose a challenge to sustaining he current growth rates. Factors such as slow recovery of the developed economies, rising input costs, tight liquidity conditions, and rising interest rates pose a downside risk to growth. The emphasis for Budge 2011-12 should therefore be to maintain and even accelerate the pace of economic recovery and speed up employment generation.


He added, given that many countries across the globe are still recording slow recovery from the global financial crisis and are continuing to provide various incentives to promote their own exports; he has requested the Government to continue with the existing peak rate of Customs duty (10%). Status quo was also recommended for the general rate of 10% Excise duty and Service tax, since these are at part with the proposed Central GST rate of 10%. Given that GST implementation is getting delayed, he sought to reduce CST from 2% to nil, since no credit is available on this tax. He has also sought moderation in direct tax rates in order to maintain competitiveness.


The views presented here are that of the author.