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India:Implementation of key issues in Foreign Trade Policy stalled |
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2004-9-16
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The Foreign Trade Policy announced recently by the Commerce Minister Kamal Nath has decided to put on hold the operationalisation of some key elements of the Foreign Trade Policy like the Target Plus initiative, deemed export benefits and sops for farm exports due to its differences with the commerce department.
Further, the decision to waive service tax for exporters and suppliers associated with exports is expected to be delayed as the revenue department as the scheme details have to be worked out. The coverage of exports eligible for the benefits is also expected to be restricted.
According to the officials, the revenue department wants to limit the scope of service tax waiver only to actual exporters, instead of waiver for all vendors as stated in the policy.
Initially, the benefits will be available to the 161 services listed under the General Agreement on Trade in Services. In addition, a system of credit on the lines of Cenvat was being proposed for the service exporters.
Officials conceded that Commerce and Industry Minister Kamal Nath had announced several sops despite objections from the revenue department.
For instance, the Target Plus initiative was included in the Foreign Trade Policy despite Finance Minister P Chidambaram being against it, officials said.
"There is no clause on value addition and it only encourages circular trading which will not boost our exports in any way," said an official.
Similarly, the revenue department is opposed to the inclusion of the agricultural machinery among the items eligible for duty-free imports under the export promotion capital goods scheme.
The commerce department is planning to list out items, which can be imported and is of the opinion that there is hardly any use of the export promotion capital goods mechanism in the farm sector and the benefits would hardly result in any revenue loss.
The issue of certain deemed export benefits for export oriented units was also being discussed with the commerce department.
Revenue department officials said the commerce department had not complied with a request for furnishing data on textiles, edible oil and steel products, despite several reminders.
According to them, the duty neutralisation schemes for the sectors led to a daily loss of at least Rs 10 crore (Rs 100 million) for the exchequer.
However, a top finance ministry source, played down the service tax issue, saying that the notification would be issued in due course and the payments were in any case due only next month |
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