The Hindu Business Line : EEPC for full-blown VAT as alternative to DEPB scheme

CONFIDENT of doubling engineering exports from the 2003-04 level of $10 billion to $20 billion in the next five years, the Engineering Export Promotion Council (EEPC) has suggested to the Government that its members, as an alternative to the DEPB scheme, favoured a full VAT regime, which would entail refund of all forms of Central and State taxes such as excise duty, sales tax, entry tax, cess and other levies.

The council has also sought clarifications with regard to Section 80HHC benefits for export profits, so that pending disputes with the I-T department could be resolved.

The council has stated that the proposed new scheme should fully address the disability factor faced by exporters on account of transaction cost, which could be refunded by way of assistance for market development, quality and technology development, which are said to be WTO compatible.

Talking to Business Line here, Mr Rakesh Shah, Chairman of the council, said it has been suggested to the Government that till such time an alternative to DEPB is found, a broad-based drawback scheme in lieu of DEPB should be put in place covering all items now mentioned in the DEPB schedule.

Seeking continuance of the existing scheme till the new one is announced, Mr Shah said exporters today were not in a position to enter into long-term contracts with overseas buyers, as they are not sure of the scheme.

He also suggested that the Government should make an announcement that the existing DEPB scheme will continue to be in force for six months even after the new scheme is announced.

He cited this as a kind of comfort level for exporters to enable them to enter into long-term contracts.

Pointing out that the proposed new scheme should have similar ease of operations as the existing one, he said it should also not insist on import content requirement.

He said while the DEPB scheme states that it only neutralises the incident of duty, "it also addresses partly the high transaction cost borne by the exporter."

Pointing out that the effect of new drawback rules was not being reflected in the relevant provisions of the Income-Tax Act, Mr Shah said the I-T authorities all over the country have been finding small technical faults to deny the benefit of Section 80HHC to exporters with regard to credit entitlement of the DEPB licence, and on the contrary, have raised huge tax demands on exporters. He said the council has already impressed upon the Government that needless litigation was cropping up owing to certain technical flaws and want of clarification with regard to I-T relief for exports under the said section.

Section 28 (iii) of the Income-tax Act was not suitably amended subsequent to repealing of the Import Export (Control) Act, 1947, which was replaced by the new Foreign Trade (Development and Regulation) Act 1992, he pointed out.

Appreciating the prompt steps by the Government to ease the JNPT congestion problem, which had assumed alarming proportions, the EEPC has suggested that the Government needs to take steps to render the less used ports such as Vizag and Mundra cost-effective for the trade.

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