The Hindu Business Line : Govt staggers tax recovery on DEPB sale profits over 5 years

In the estimate of the Federation of Indian Export Organisations (FIEO), the exporting community will now be required to pay about Rs 6,800 crore over five years.

New Delhi , Jan. 18

IN A major relief to exporters, the Finance Ministry has said that income-tax demands made on exporters for the profits earned from the sale of duty entitlement passbook (DEPB) credits during 1998-99 to 2004-05 would be recovered over five years. Also, the interest and penalty for late payment have been waived off for the exporters.

The Central Board of Direct Taxes (CBDT) has given a directive to its field formations that penalty would not be levied nor interest charged on any fresh demands made (after the recent income-tax law amendments) by the income-tax department to recover taxes on profits arising from the sale of DEPB credits.

In the cases where the assessments have been completed, the chief commissioners of income tax have been authorised to waive the penalty that has been levied or the interest that has been charged.

Where penalty proceedings relating to claim of profit on the sale of DEPB credit under Section 80 HHC of the Income Tax have been initiated but not levied, the CBDT has said that such proceedings would have to be dropped.

In the estimate of the Federation of Indian Export Organisations (FIEO), the exporting community will now be required to pay about Rs 6,800 crore over five years. "Our calculations show that about Rs 6,800 crore would have to be paid by the exporting community to the Government. This will have to be done over five years. Exporters from the engineering sector would be required to pay over Rs 1,000 crore as they were the biggest beneficiaries when the tax (on profits from sale of DEPB credits) was not there," Mr Ajai Sahai, Director General of FIEO told Business Line.

The Government had late last year amended the income-tax law to confer legal validity to the income-tax department's efforts to recover taxes, on a retrospective basis, on profits arising from the sale of DEPB credits.

It, however, did not accede to the exporting community's demands that the profits earned from the sale of DEPB credits should be tax-exempt across the board. The Government had brought in amendments in such a manner that exporters with export turnover of less than Rs 10 crore were not required to fork out any taxes on the sale of DEPB credits. However, a large section of the exporting community with an export turnover of over Rs 10 crore were required to pay taxes on the profits earned from the sale of DEPB credits.