Duty drawback scheme deepened to support exports

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To back exports from India, the government on Monday announced its intention of expanding a scheme that refunds tax on products shipped out and extend the time for special economic zones (SEZs) to qualify for tax exemptions.

“The duty drawback scheme has been widened and deepened to include more products and countries. The government will continue to take measures to support the export sector,” finance minster Arun Jaitley said.

The details of the scheme like what new products would be included in the list of drawback and what would be the new rate are expected in the coming weeks. It could be announced along with the annual supplement to the Foreign Trade Policy 2014-19 that is likely to be announced in April.

While the Budget took no action on the long-standing demand of the commerce ministry to withdraw minimum alternative tax (MAT) on SEZs, it provided relief by giving more time to the industrial zones that are being set up to become operational to qualify for tax exemptions.

The committee that was set up to work out a roadmap for withdrawal of tax exemptions so that corporate income tax can be gradually brought down to 25 per cent from 30 per cent had suggested that SEZs, which do not become operational by March 2017, should not be allowed tax benefits.

The Budget extended the time available to SEZs to qualify for tax exemptions till March 2020. They will, however, have to pay MAT like those paid by existing SEZ units.

The industrial parks that have been set up under the SEZ Act qualify for various tax exemptions given by the Centre and the states.

The promoter of an SEZ and units coming up there can import goods and services without paying any duty. They are also allowed 100 per cent tax exemption on export income for five years and 50 per cent for next five years.

In the Budget 2011-12, 18.5 per cent of MAT was imposed on them and since then every year commerce ministry asks for its withdrawal.

The sops for the export sector come at a time when they have been shirking for the past 14 months.

In the first 10 months of the current financial year, exports have declined 17.65 per cent on year to $217.6 billion.



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