The Hindu : Business : Sops likely for 100 per cent EoUs

Online edition of India's National Newspaper
Wednesday, Feb 09, 2005

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Business

Sops likely for 100 per cent EoUs

By Our Special Correspondent

NEW DELHI, FEB. 8. The Government is considering tax sops for the 100 per cent export-oriented units (EOUs{rcub} that might be provided in the forthcoming Union Budget for 2005-06 to bolster fresh investment in the sector that has been witnessing steady decline.

An indication of the Government considering some sops for them came during a meeting between the Revenue Secretary, K. M. Chandrasekhar, and a delegation of the Confederation of Export Units (CEU) yesterday. He said he agreed in principle with the suggestions of the CEU.

The CEU has been demanding, among other things, removal of sunset clause in Para 10 B of the Income-tax Act to encourage fresh investments in the scheme and exemption from Central sales tax and other central levies as they can not be exported and have to be neutralised.

A. C. Poonawalla, who has recently been awarded Padma Shri, led the CEU delegation. P. C. Nambiar, CEU Western Region Chairman, made the presentation on behalf of the CEU.

Urging the Government to consider EoUs on a par with units in the Special Economic Zones (SEZs{rcub}, Mr. Nambiar said as compared to SEZ units for whom infrastructure was provided by the Government, the EoUs, being located in the underdeveloped areas, have to develop their own infrastructure, comply with local regulations, employ unskilled local populace, train them and make the units technically competitive. As against SEZs, EoUs are present in all the 22 states, he said.

In the absence of proper incentives, investment in EoUs has been constantly declining as was evident from the fall of Rs. 582 crores in just one year. From Rs.18,168 crores in 2002-03, it dropped to Rs. 17,586 crores in 2003-04, the presentation said.

In spite of this, the performance of EoUs had been impressive, the presentation said adding that last year the units recorded exports of Rs. 28,000 crores and given proper policy support, the sector could attain 30 per cent annual growth.

In this connection, it was pointed out that even though the Foreign Trade Policy provides for exemption of service tax for EoUs, unfortunately the Department of Revenue has not issued the notification so far, forcing them to avail themselves of the service tax credit and utilise it for payment of excise duty on domestic tariff area (DTA) sales or claim the rebate under Rule 18 of Central Excise Rules or claim refund under Rule 5 of CENVAT Credit Rules.

Service tax, though is modvatable but very useful for EoUs which do not use DTA sales or the EoUs whose products are not salable in the domestic market

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