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Wednesday, Oct 30, 2002

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Kelkar panel for pruning export promotion schemes

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NEW DELHI, Oct. 29

EXPORTERS currently enjoying the benefit of duty exemptions and tax reliefs from a slew of export promotion schemes may well have to be content with just four of them.

The Kelkar panel on indirect taxes has made out a case for retaining only four such schemes - duty drawback, advance licence, special economic zones (SEZ) and export-oriented units (EOU) - in future.

The exception would be the Duty Entitlement Pass Book scheme, which will continue for one more year, beginning April 2003. Progressive reduction of sales in the domestic market by EOUs from the existing 50 per cent to 10 per cent in 2005-06 has been mooted.

The feel-good factor was, however, set to be restored through the "industry-friendly" package of indirect tax reforms , which is estimated to reduce transaction costs by Rs 5,000 crore per annum, Dr Vijay Kelkar, Chairman of the panel, said at a press conference here. The country's total exports were of the order of around Rs 2,03,571 crore in 2000-01, with transaction costs accounting for as high as eight to 10 per cent for major exports such as pharmaceuticals and textiles.

The reform package encompasses rationalisation of customs and excise duty rates, simplification of procedures, universal green channel for customs clearance, expediting dispute resolution, levying excise on the basis of value addition and halving the exemption limit on products manufactured by small-scale units to Rs 50 lakh by 2005-06.

The panel acknowledged that it would not be practical to have a single Cenvat rate of 16 per cent. There would hence be three rates - zero per cent, eight per cent, 16 per cent - and special rates for demerit goods such as liquor.

Consumer prices of food products is set to rule easy, with the panel recommending an eight per cent excise duty rate for these products. Motorcars will become cheaper as the duty rates would be cut by four per cent every year. Currently, motorcars attract an excise duty of 32 per cent.

Retail price of petrol will also head southwards with the Kelkar panel recommending lowering the excise duty rate on this product from 28 per cent to 16 per cent. In fact, all petro-products will attract the Cenvat rate of 16 per cent.

It has also recommended a five per cent basic customs duty (BCD) differential between crude and its products. This will, however, adversely impact on the refinery margins as the differential is currently around 10 per cent.

The BCD on crude would be 10 per cent during 2003-04 and 15 per cent for other products and would be reduced to 5 per cent and 10 per cent respectively in 2004-05.

While the exact revenue implications of the proposed changes in duty structure of all products had not been worked out, Dr Kelkar said it would largely be "revenue neutral."

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