The Hindu : Front Page : Service tax on exports goes

Online edition of India's National Newspaper
Wednesday, Sep 01, 2004

Front Page

Service tax on exports goes

By Sushma Ramchandran

NEW DELHI, AUG. 31. The United Progressive Alliance Government today released its first-ever foreign trade policy to double India's share of global trade to 1.5 per cent in the next five years.

In a major relief to exporters, the policy does away with the service tax on exports while seeking to give a push to employment generation by outlining a special package for agriculture exports.

Key elements

Other key elements include the creation of free trade warehousing zones, the setting up of a Services Export Promotion Council and biotechnology parks while providing special focus initiatives in the handicrafts, handloom, jewellery and leather sectors.

The import of second-hand capital goods will also be allowed without any age restrictions.

Outlining the policy, the Commerce and Industry Minister, Kamal Nath, said the two main aims of the new foreign trade policy were to double the country's share of global trade by 2009 as well as to act as an effective instrument of economic growth by giving a thrust to employment generation. "Trade is not an end in itself, but a means to economic growth and national development," he said.

At a press conference, Mr. Kamal Nath said the main challenges faced in seeking a 20 per cent export growth in the next five years were the hardening rupee, the rising world crude oil prices and the lack of adequate infrastructure.

Even so, he felt the export target must be kept high to sustain the growth momentum.

The Board of Trade would no longer remain a mere "formality" and would not only be revamped but also headed by someone outside the Government.

A multipronged strategy was needed to attain the policy objectives and this could not be devised within the four walls of Udyog Bhavan and could only happen in partnership with trade.

On the import of second-hand capital goods, he said this would not result in dumping and no other country had such restrictions.

Highlighting the need to unshackle controls and simplify procedures, he said that all goods and services exported would be exempt from the service tax while exporters with a minimum turnover of Rs. 5 crores and a good track record would be exempt from furnishing bank guarantees in any of the schemes. This would reduce exporters' transaction costs.

A new scheme to establish Free Trade and Warehousing Zones (FTWZs) has been introduced to make India a global trading hub. Foreign direct investment will be permitted up to 100 per cent and each zone will have a minimum outlay of Rs. 100 crores.

Giving details of the agriculture package, Mr. Kamal Nath said the Vishesh Krishi Upaj Yojana was being introduced to boost the export of flowers, fruits, vegetables, minor forest produce and their value added products. Capital goods imported under EPCG (export promotion capital goods) for agriculture would be duty-free under the scheme.

`Target Plus' scheme

In addition, another new scheme called "Target Plus" was being launched to achieve a quantum growth in exports. This would help exporters achieve a quantum growth with duty-free credit based in incremental exports higher than the general export target.

As for the popular DEPB (duty entitlement pass book) scheme, he said it would continue till replaced by a new WTO-compatible scheme.

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