Exporters on Thursday demanded fiscal incentives, tweaking in customs duties on certain products and credit at affordable rates in the forthcoming Budget to boost exports and create jobs. In a pre-budget virtual meeting with Finance Minister Nirmala Sitharaman, the Federation of Indian Export Organisations (FIEO) said the depreciation of the rupee against the US dollar is affecting exports’ competitiveness and the sector requires more support.
“Creation of employment is the biggest challenge faced by the country…We would urge the government to provide fiscal support to units which provide additional employment in the export sector,” the exporter’s body said. It said that incentives may be provided based on twin criteria of growth in exports and the creation of additional jobs.
The body stated that at a time when global demand for goods is declining, it has become fundamental to go for “aggressive” marketing. It argued that the Rs 200 crore support given under Market Development Assistance (MDA) scheme for promoting exports to USD 460-470 billion is just a “drop in the ocean”. “Therefore, for aggressive marketing, there is a need for the creation of an Export Development Fund with a corpus of minimum 0.5 per cent of preceding year’s exports,” it suggested adding a special scheme for goods exported by MSME can be introduced in the Budget.
On the direct tax front, it has demanded an increase in the deduction for investment. On R&D, and procedural simplification by the abolition of TCS (Tax Collected at Source) has been sought. It also asked for a 200 per cent tax deduction on the expenditure made by exporters for overseas marketing; and extension of tax incentives for the private sector to set up a global Indian shipping line to tap the market. On loans to MSMEs (micro, small and medium enterprises), FIEO said the credit rate is currently between 11-13 per cent and it may increase further in the next few months.
“Therefore, there is an urgent need to restore the interest equalization (subsidy) benefit of 5 per cent to manufacturer MSMEs and 3 per cent to all 410 tariff lines (broad sectors) as existed prior to October 2021, as cost of credit has crossed the pre-COVID level and is adversely impacting exporters,” it added. On Goods and Services Tax (GST), the body asked for a tax refund to foreign tourists at the airport as it would give a fillip to tourism and exports of handicrafts, carpets, khadi, and leather goods.
In the meeting, the Council for Leather Exports (CLE) demanded the reinstatement of basic customs duty exemption on the wet blue crust and finished leather to boost the shipments. Such leathers are mainly imported by domestic exporters for making value-added products such as handbags, and garments. Duty-free import of finished leather helps manufacturers to become more competitive. The council also suggested reinstating and maintaining a 40 per cent export duty on rawhide and wet blue, besides permitting exports of crust leather of all types without any export duty.
Exporters have suggested tweaking in customs duties on a range of items such as raw silk, silk yarn (import duty from 15 per cent to 10 per cent), raw cotton (duty-free), copper ores, India’s exports entered negative territory after a gap of about two years, declining sharply by 16.65 per cent to USD 29.78 billion in October, mainly due to global demand slowdown, even as the trade deficit widened to USD 26.91 billion, according to data released by the commerce ministry.
Key export sectors, including gems and jewellery, engineering, petroleum products, ready-made garments of all textiles, chemicals, pharma, marine products, and leather, recorded negative growth during October. During April-October 2022, exports recorded a growth of 12.55 per cent to USD 263.35 billion. Imports rose 33.12 per cent to USD 436.81 billion. The merchandise trade deficit for April-October 2022 was estimated at USD 173.46 billion as against USD 94.16 billion in April-October 2021, as per the data.
The budget for 2023-34 is likely to be presented on February 1 next year. Industry body PHDCCI has asked for enhancing consumption by incentivising the consumer with wider tax rebate benefits for consumption expenditure. “We suggest that there must be a priority lending for MSMEs, and separate production linked incentive scheme for them…Taxes on biofuels should be brought to nil,” the chamber said adding import duty on electrolysers should be brought to nil to attract investment in Green Hydrogen.
The representatives of companies, trade and industry bodies including Wipro Ltd, Gem and Jewellery Export Promotion Council, FIEO President A Sakthivel, chambers of commerce from Tamilnadu and Calcutta, North Assam, National Restaurant Association and Apollo Hospitals Group also attended the meeting.
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Story first published: Friday, November 25, 2022, 9:35 [IST]