NEW DELHI: Days before a scheduled interaction with Commerce and Industry Minister Kamal Nath to sort out their woes, exporters have expressed shock over reports of inter-ministerial wrangling that could delay a major benefit extended to them in the recently announced annual supplement to the Foreign Trade Policy (FTP).

"When Commerce Minister announced [the] removal of service tax on exports in FTP, we were happy and thought at least part of the rupee rise impact would be made up. But reports of discord between finance and commerce ministries on the issue has shocked us,'' Federation of Indian Export Organisations (FIEO) President Ganesh Kumar Gupta said at an interaction with newspersons on Tuesday.

Explaining his Ministry's position after releasing the annual supplement to the FTP, Mr. Kamal Nath had pointed out that the service tax was being exempted in keeping with international practice. "Nowhere in the world are taxes exported,'' he said, while refuting criticism on grounds of revenue loss.

Earlier this week, a Commerce Ministry official maintained that the withdrawal had the Prime Minister's concurrence. Mr. Kamal Nath further fuelled hints of a rift when he observed at a function: "I know who is behind it and I know who is doing it. But that is another story.''

Exporters, the FIEO chief said, were dismayed by reported observations from Union Finance Ministry officials that Mr. Kamal Nath's waiver of service tax on exports was unilateral and premature. Another exporter and FIEO office-bearer Subhash Mittal said the sector was concerned over disputes between the two ministries. "Absurd though the suggestion might sound,'' their merger would be to the benefit of trade and industry, he added.

Mr. Gupta expressed doubts about the country achieving the revised export target of $160 billion for the current fiscal if the Reserve Bank of India and the Government chose not to neutralise the impact of an appreciating rupee. "I have received inputs from various segments suggesting deceleration in growth in 2007-08. Apparel exports, which grew by five per cent last year, would decline if corrective steps are not taken,'' he cautioned. This appreciation of the rupee, he felt, would occupy the centre stage at the meeting between Mr. Kamal Nath and all stakeholders of the exporting sector.

PTI reports:

Commerce Minister Kamal Nath on Wednesday met Finance Minister P Chidambaram amid reports of differences on service tax waiver on exports as announced in the Foreign Trade Policy.

The meeting lasted for about 90 minutes and issues related to Vodafone, cement prices and tax implications of incentives announced in the FTP were believed to have been discussed.

On the service tax, officials in the Commerce Ministry said the move had the backing of the Finance Ministry and approval of Prime Minister Manmohan Singh.

They said that all notifications regarding the FTP, including the one relating to service tax removal, would be issued within 30 days.

Officials said many rounds of discussions were held with the Finance Ministry on the proposal.

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