The Hindu Business Line : FIEO seeks urgent steps for tax refund clearance

Kolkata, Feb. 20 Narrating the woes of exporters in the wake of rupee appreciation and hardening interest rates, and the ‘abnormal’ delay in refunds with regard to duty drawback, excise rebates, service tax and VAT, Mr Ganesh Kumar Gupta, President of Federation of Indian Export Organisations (FIEO), said that many exporters have still not got refund on account of increase in drawback rates effected six months ago.

Talking to Business Line, he said while the Government can do little to arrest the appreciation of the currency, “surely something can be done to issue immediate instructions to clear all refund backlogs within 30 days to restore competitiveness of Indian exports”. He said service tax refunds amounting to hundreds of crores were still awaiting detailing of procedure of claims or processing at the tax authorities’ end.

Pointing out that VAT refunds of exporters in West Bengal have accumulated from the day it was implemented, he said various sectors like engineering, leather, handicrafts etc which had pushed up export production and depended on VAT refunds were disappointed to say the least. Non-refunds, he felt, had made such a dent on the working capital that most exporters were either shifting base or are forced to close shop.

A ripple effect, according to him, was that potential investors were reconsidering their plans in the State on knowing that their VAT refunds may not be made, threatening employment generation in the State.

He said the Commercial Taxes department in West Bengal was still in the process of finalizing its policy on VAT refunds. Additionally, the VAT refund claims of 2005-06 will be time-barred in March 2008 making the claims redundant, he feared. According to Mr Gupta, in States like Tamil Nadu, Andhra Pradesh and Maharashtra, VAT is refunded within 90 days of submission of claim.

Mr Gupta said the total refunds pending (all India) for the engineering sector was around Rs 225 crore (2005-06 and 2006-07), handicrafts Rs 30 crore (05-06 and 06-07) and leather Rs 80 crore (06-07 and 07-08 till date).

Export promotion

Seeking further tax incentives, he said in the past, under Section 35 (B) of Income Tax Act, a weighted deduction of 133 per cent was allowed against export promotion expenses such as product development, quality upgradation and market development. Alternatively, he suggested that the earlier scheme of ‘export profit reserve’ may be reintroduced to encourage exporters to broaden their capital base for expansion of business.

He felt exporters should have the option of maintaining an export profit reserve of up

to 50 per cent of their annualised gross profit.

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