The Hindu Business Line : Customs duty cut on select manmade fibres, intermediates

New Delhi, Nov. 29 The Government on Thursday announced another relief package for rupee appreciation-hit exporters, providing succour to textiles, leather and leather manufactures, and marine products by addressing their concerns on additional subvention on trade credit, service tax exemption to three additional services and cutting down customs duty on select manmade fibres and intermediates. This is over and above the two packages announced in July and October on similar lines.

Winding up the discussion on the supplementary demands for grants in the Lok Sabha, the Union Finance Minister Mr P.Chidambaram, said that the Government remained “sensitive” to pressures on the export sectors especially those with low import intensity such as leather, textiles, handicrafts and marine products.

Mr Chidamabaram said leather and leather manufacturers, marine products, all categories of textiles under the existing scheme including readymade garments (RMG) and carpets excluding man-made fibre and handicrafts would get additional subvention of two per cent in pre-shipment and post-shipment credit over and above the two per cent extended earlier.

He, however, qualified this stating that the total subvention would be subject to the proviso that the interest rate, after subvention, would not fall below 7 per cent, which is the rate applicable to the agriculture sector under priority lending. The period of validity is from November 1, 2007 to March 31, 2008. The duration of credit is 180 days for pre-shipment and 90 days for post-shipment, excepting the carpet sector for which the term would be 270 days for pre-shipment and 90 days (like other sectors) for post-shipment.

He announced exemption of service tax for three new services, covering storage and warehousing services, specialised cleaning services (fumigation and disinfection) and business exhibition services, taking the total tally to 11 services as being exempt from service tax to exporters.

The Government has decided to extend provision of payment of interest for delays in payment of terminal excises duty and Central Sales Tax, like the 6 per cent interest being paid for delay in reimbursement of drawback claims beyond 30 days.

Mr Chidambaram announced customs duty cut on polyester staple fibre and polyester filament yarn from 7.5 per cent now to 5 per cent and on other man-made fibres from 10 to 5 per cent, while customs duty on intermediates for PSF and PFY, viz., polyester chips, DMT, PTA and MEG would also be reduced from 7.5 per cent to 5 per cent and on paraxylene, a raw material for PTA from 2 per cent to nil. However, he ruled out any change in customs duty for nylon chips, nylon yarn, carprolactum, rayon grade wood pulp and acryhlonitrile. The notification on this would follow, he said.

On the persistent plea of textile exporters for revision in drawback rates, The Finance Minister said that he has asked respective councils in the textile sector to provide inputs to the Drawback Committee on whose recommendation a decision would be taken. The Finance Minster while conceding that on a year-on-year basis, the rupee appreciation has been 15.1 per cent between October 2006 and October 2007 said that appreciating rupee has also had a positive side in terms of lower production costs in sectors entailing imported raw material and intermediates, lower oil import bill and lower cost of external debt servicing.

Highly-placed sources in the Commerce Ministry, however, said that the package announced particularly for the textile sector would not help it to overcome its constraints. They said the drawback rate revision demanded by the industry would have helped it to cushion the adverse effect of rupee appreciation, as also service tax exemption/refund to all the services exporters incur.