The Hindu Business Line : Engg export promotion council seeks fringe benefit tax relief

THE Engineering Export Promotion Council (EEPC), while welcoming the recent amendments to some of the provisions of the fringe benefit tax (FBT), has pointed out that these changes have fallen short of the expectations of the exporting community.

It has urged the Government to reconsider the case of exporters and totally exempt all export promotion efforts, whether in India or abroad, from the ambit of FBT.

It is felt that the Government should immediately issue a clarification, exempting cost of participation in overseas fairs and exhibitions (for export promotion) from FBT, so that "the Government policy of promoting such events through Market Development Assistance does not take a `U' turn."

Talking to Business Line, Mr Rakesh Shah, Chairman, EEPC, said the council has always believed that exporters should be "immune to transaction costs" and all other direct and indirect taxes to stay competitive in "today's razor edge" overseas market. Seeking a globally aligned tax regime, Mr Shah said some of the essential expenses of exporters, particularly with regard to foreign travel, participation in overseas fairs, exhibitions, business and foreign delegations, have to be kept outside the purview of FBT.

He said it was unfortunate that the Finance Minister, while announcing concessions and clarifications on FBT, had not given any consideration to expenses of overseas travel, hotel and allied costs.

"In today's fiercely competitive market, if overseas travel for export promotion is discouraged with imposts such as FBT, we apprehend a serious setback to the country's efforts to cross swords with China and other rapidly developing countries." He argued that after all "it is goods and not tax" that are being sought to be exported.

Mr Shah said another important expenditure an exporter needs to make often is towards inviting foreign delegates to the country for factory visits and other business interaction. The related travel and hotel cost of such delegates should be exempt from FBT.

Mr Shah said the council has set an ambitious target to double engineering exports to nearly $25 billion by 2009-10, from the current fiscal's $13 billion (revised), and "imposition of FBT will not only seriously jeopardise growth of exports from this sector but will also force us to revise the target."

He said, going by the extremely encouraging export trend so far, we are quite confident of overshooting the target, and may be even clock exports close to $15 billion for 2005-06. EEPC is confident of achieving a figure of $13 billion exports for 2004-05, exceeding the target of $12.75 billion.

Mr Shah clarified that the 90-day refund provision under the State-level VAT would also prove to be a major stumbling block for exports in general, and engineering exports in particular.

Going by even modest calculations, an average exporter would block some 4 per cent of his working capital, awaiting such refunds, which may actually take longer than 90 days, he pointed out.

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