The Hindu Business Line : Cashew industry wants service tax on brokerage to go

Kochi, Dec 31 The cashew industry has appealed to the Centre to enhance the DEPB rates besides doing away with the service tax on brokerage as the industry is passing through a tough time due to the impact of rupee appreciation and various un-rebated levies.

The un-rebated levies borne by the exporters, while procuring, processing and exporting cashew, come to about 6.5 per cent of the cost, industry sources in Kollam told Business Line.

They said the Union Finance Minister, Mr P Chidambaram, last week asked the State Governments to “relieve exporters of tax burden” by refunding or giving rebate for various taxes including value added tax (VAT), octroi and electricity borne by the exporters. “At the same time, the Centre should also help us either by doing away with or reducing certain levies which are hitting us badly,” they said.

Strengthening of the rupee against the dollar had severely hit the industry as most of the cashew exports from the country were dollar-denominated and subject to substantial influence by exchange rate changes, they said.

The rupee was at its lowest against the dollar at Rs 49 in May 2002 making exports attractive. “Contrary to expectations that the dollar-rupee rate of exchange would depreciate to more than Rs 50 per dollar over the last 5 years, the rupee gradually appreciated and is now pegged at about 39 against the dollar,” they said.

Over the last year or so, the rupee has appreciated by about 15 per cent against the dollar. At the same time, during this period, Dong, the Vietnam currency depreciated by 3 per cent against the dollar. “This has made our cashew kernel less competitive in the international market”.

It was a blow when the Duty Entitlement Passbook (DEPB) rates for cashew, which was enhanced earlier by 3 per cent to offset the negative effects of rupee appreciation, was slashed to 1.5 per cent from October 9 last. Besides, cashew is now included under the product code 90 – Miscellaneous Products for DEPB rate, they said.

Other products such as tea, coffee, fish, walnut, etc continue to enjoy higher DEPB while cashew in bulk was left with 1.5 per cent and that in consumer packs of 1kg or less with 2 per cent DEPB.

The Cashew processing industry in India provides direct employment to more than 10 lakh workers in the farm / factory / trading sectors, mostly, women from the rural and semi urban regions, Mr Sasi Varma, Secretary, CEPC, said.

Though it is true that the fall out arising from the appreciation in rupee should not be the sole basis for grant of incentives, the job impact of cashew exports by itself should be sufficient reason for the Government to give enhanced incentives by increasing the DEPB rates by 5 per cent at least, he said.