FIEO’S Pre-Budget Proposals for 2008-09
FIEO presented its pre-budget memorandum for 2008-2009 to Mr. R S Gujral, Director General, Ministry of Commerce & Industry, Directorate General of Foreign Trade; Ms. Anju Sharma, Director, Ministry of Commerce & Industry (Trade Finance Section); and Mr. H A C Prasad, Senior Economic Adviser (Additional Secretary), Ministry of Finance, Department of Economic Affairs.
DIRECT TAXATION
Extending Sec.10A & 10B of the Income Tax Act to all exporting units, whether merchant or manufacturer exporters
Units in the Domestic Tariff Area (DTA) which export more than 75% of the production are not given any tax incentives for their foreign exchange earnings while units in the SEZs and 100% EOUs are provided tax relief u/s 10A and 10B of the Income Tax Act respectively.
The objective of providing incentives to units, which fall under the purview of Sec. 10A and 10B, is to encourage earning of valuable foreign exchange, which in turn has a multiplier effect on the economy and also provide mass employment in far-flung semi-urban and rural areas for skilled and semi-skilled artisans in labour intensive sectors, which may also be extended to units in DTA.
Allowing weighted deduction against export promotion expenses or reintroducing ‘export profit reserve’ scheme
With the introduction of fringe benefit tax and the expansion of service tax to net business auxiliary services, the unit cost for exporting merchandise/services has increased substantially.
As in the past, weighted deduction of 133% under Section 35 (B) of Income Tax Act should be allowed against export promotion expenses such as product development, quality up-gradation and market development.
Alternatively, the earlier scheme of ‘export profit reserve’ may be considered for re-introduction in addition to the above and exporters should have the option of maintaining export profit reserve upto 50% of their annual gross profit.
Waiving Fringe Benefit Tax for export sector
The imposition of FBT on sales promotion expenses including publicity (other than expenditure on advertisement), tour and travels, use of hotels, boarding and lodging and free samples have seriously affected the marketing efforts of the Indian exporters.
Extending the provisions of Section 10BA to other sectors such as art ware, textiles, made-ups, handmade carpets, stone and glass articles and other items of small and cottage sectors
The Presidential Ordinance No. 2 of 2003 has introduced a Section 10BA w.e.f. 1st April, 2004 till the assessment year 1st April, 2010. The special provisions include export of all handmade articles or things which are of artistic value and which require the use of wood as the raw material.
Suitable modifications should be carried out to include all existing units besides extending the relief to all labour intensive units.
Deleting Section 2(22) (e) of the Income Tax Act
Above Section was included in the Income Tax Act, 1961 when income was taxed and no dividend was declared. Perhaps it was presumed that the companies were passing the benefit to the common shareholders and hence any loan given to a related company was considered as a Deemed Dividend.
Since the conditions in the last few years have changed and dividends are no longer taxable, the said Section has outlived its utility and may, therefore, be done away with to ensure better fund management/liquidity within group companies.
Simplifying tax laws
The rate of deduction of tax has been prescribed in the respective Sections (except Section 192). However, payments to non-residents, be in India or outside, is governed by provisions of Section 195, which is highly complex and is evident from a number of litigations on the issue.
To make compliance easy, it is suggested that normal TDS provisions such as Sections 194A, 194C, 194H, 194I and 194J, may also be made applicable to various payments made in rupees to a non-resident operating in India without bringing any revenue loss to the Government.
It should be noted that the withholding tax rates prescribed under most tax treaties from royalty, fees for technical services, interest and so on, are at par with the tax rates specified in Sections 194A and 194J. However, if the payee finds that in a given case, the TDS rate is higher than the TDS rate applicable in his case, he may obtain a certificate from a Chartered Accountant or an Assessing Officer.
INDIRECT TAXES: CUSTOMS
Exempting basic customs duty on capital goods imported under EPCG
EPCG scheme is basically designed to build production capacities of export goods by allowing exporters to import capital goods at a reduced rate of duty (currently at five percent). This has resulted in increasing our exports and boosting foreign exchange reserves.
Today all exporters are required to be globally competitive in terms of efficiency, pricing and cost of production. To provide exporters a complete level paying field, the Government should exempt them from paying any customs duty on capital goods imported under EPCG scheme.
Exempting basic customs duty on capital goods for power plants
Customs duty exemption on capital goods for power plants will help reduce the cost of power generation which will help our economy at large by encouraging more industries to set up power plants. All initiatives from industries to set up independent, merchant and captive power plants should be encouraged by the Government.
Reducing basic customs duty on Copper Concentrate (ITC HS Code 26.03) from two percent to Nil
Copper concentrate is imported at LME prices and refined copper is sold at domestic market or exported at LME prices. The conversion cost and other charges are recovered from Treatment Charges and Refining Charges (TC/RC) allowed by the mines. The present TC/RC rates are almost fifty percent of what it was prevailing last year, whereas the production cost which involves factors like power cost etc. have gone up. TC/RC rates are dollar denominated whereas conversion cost is rupee denominated. With the hardening of rupee against dollar, the net realizations on TC/RC have come down by Rs.150 crore per annum putting margins under severe strain. LME prices have gone up more than 3 times in a span of three to four years resulting in higher interest cost.
|
Presentation on Foreign Exchange Risk Management (February 20, 2008)
FIEO (Northern Region), in association with Indian Institute of Foreign Trade (IIFT), New Delhi, is organizing a presentation on "Foreign Exchange Market and Risk Management in Rupee Appreciation Scenario." This presentation will be of immense use to the exporters as it will focus on the ways to minimize foreign exchange risk while exporting to international markets. The presentation has been arranged as per the following schedule:
For more details and participation, please contact, FIEO (Northern Region) at Tel: 011-46042118, 46042121, 46042172; Fax: 011-26148194; E-mail: fieo@nda.vsnl.net.in |
Government should lower import duty for finished copper from 7.5% to 5%. Industry is suffering on account of reduction in TC/RC rates, strengthening of rupee against dollar, higher working capital requirements, etc. Hence, customs duty on copper concentrate should be lowered by 2% to NIL.
Excluding levy of Interest under Section 18(3) of the Customs Act under specific situations
With effect from 13th July 2006 by means of Section 21 of the Taxation Laws (Amendment) Act, 2006 (29 of 2006), Sub-Section (3) was added to Section 18 of Customs Act, 1962 creating a liability of interest on the differential amount payable on final assessment from the date of provisional assessment till the date of payment of differential value.
This provision should exclude following two situations:
-
Genuine financial transactions where Buyer and Seller do not know the final price which is decided by International Market (like London Metal Exchange in our case) and which is totally beyond the control of both the buyer and the seller where no financial accommodation is said to have been made.
-
Administrative delay in finalizing the consignment occurring at Customs Department after submitting all necessary documents for final assessment.
Relaxing duty on import under Project Route
Realizing the importance of port development projects as infrastructure projects for economic development of the country, the Central Government, with a view to minimizing the incidence of custom duty, has incorporated Port Development Projects under assessment heading 98.01 (Project Imports) vide Sr. No. 16 of Customs Notification no. 42/96, dated 23.07.1996 as amended from time to time. There is no specific exemption Notification issued in this regard. In the absence of any specific Notification, it is necessary to refer Sr. No. 441 of Custom Notification 21/2002, which deals with assessment of duty under ‘Project Imports’.
The existing basic customs duty of 7.5% on ‘Project Import for Port Development’ may be completely exempted. A Port is not a manufacturing unit and hence the additional duty may be clearly mentioned as NIL.
Reducing customs duties on watch cases, straps and parts thereof
Watch components falling under Customs Tariff Chapter Headings 91; attract basic customs duty at 10%. Even completely assembled wristwatches falling Chapter 91.01 and 91.02 attract a basic customs duty of 10%.
The rate of customs duty on watch cases and straps falling under Chapter headings 91 may be reduced from 10% to 5%.
|
Continuing its series of workshops organized in different parts of the country on UCP 600, FIEO organized another workshop at Kanpur on 7th January. The workshop was organized in association with Indian Institute of Foreign Trade and Export Promotion Bureau. A large number of exporters, freight forwarders and other business executives attended the workshop. UCP 600, a revised version of UCP 500, came in force worldwide from 1st July 2007. It contains important new provisions relating to transport, insurance and other areas. A number of global |
 |
|
Dr.R K Dhawan, Chairman, FIEO(NR) addressing meeting. On his right is Prof. Harkirat Singh, IIFT. |
|
|
surveys indicate that on the grounds of discrepancies, approximately 70% of the documents presented under letters of credit are rejected on first presentation. The new UCP 600 aims to reduce this percentage significantly. |
|
|
According to Dr. R. K. Dhawan, Chairman, FIEO (Northern Region), around 15% of international trade transactions valuing over a trillion US dollars are based on letter of credit. Important speakers who addressed the participants at the workshop were Mr. Prabhat Kumar, Joint Export Commissioner, Export Promotion Bureau, Lucknow; Mr. J P Agarwal, President, Merchant’s Chamber of Commerce of UP and Prof. Harkirat Singh, IIFT. |
 |
|
The meeting is in progress. |
|
Relaxing conditions under Customs Notification No.102/2007 dated 14.9.2007
Customs Notification No.102/2007 dated 14th September, 2007, exempts the whole of the additional duty of customs by way of refund provided the goods are imported for sale. While claiming for refund, the importer has to produce large volume of VAT invoices, which increases the transportation time and cost and creates hardship.
It is suggested that such refunds should be allowed based on an independent Chartered Accountant’s certificate in this regard since very often there are bulk imports to achieve economics of scale and the refund is related to sale of such imports. Therefore, such refunds may be exempted from the period of limitation of 6 months.
Permitting direct import of Gold and Silver
Currently, gold and silver are being imported from various sources through Government nominated agencies with service charges being levied on the same. Service charges are being paid since the concerned agencies of the Government work as an intermediary between buyer and seller. The only real services being performed by these agencies are moving of documents between the two parties.
It is crucial to continuously improve procurement efficiencies. The direct import of gold and silver by corporate entities will increase the competitiveness of jewellery industry, reduce attendant delays in the import of gold and silver and reduce the volume of the related documentation. Policy Guidelines may be framed for direct import of gold and silver with the existing maximum of 180 days tenure from international bank/refineries.
Exempting membrane from customs duty
Customs Duty and Excise Duty were exempted for water recycling project implemented for Agricultural and industrial use vide Notification No.3/2004 (Central Excise) and 14/2004 (Customs) both dated 8th January, 2004. While issuing this exemption notification, it was specifically mentioned that exemption from the duties would cover spares and replacement parts also, Reverse Osmosis Membrane, Nano or Ultra Filtration Membrane are not covered under the exemption. The processing units in textile industry are largely importing Reverse Osmosis Membrane (Spare Parts) mainly for purifying water or recycling purpose. The Membrane is the essential items required while going for zero discharge system. So membrane should be exempted from payment of customs duty.
|
Training Programme on Use of Internet for Sourcing Buyers (February 28, 2008)
FIEO (Northern Region) is organizing a Training Programme on "Use of Internet for Sourcing Buyers" as per the following schedule:
Day & Date : Thursday, February 28 2008 Time : 3.30 -5.00 p.m. (followed by high tea) Venue : Niryat Bhawan, Rao Tula Ram Marg, Opp. Army Hospital, New Delhi – 110 057 Participation : Rs. 300/- per person
(Limited seats on first-cum-first served basis)
Topics To Be Covered: how to source buyers searching important portals, how to use trade leads profitably
For more details and participation, please contact, FIEO (Northern Region) at Tel: 011-46042118, 46042121, 46042172; Fax: 011-26148194; E-mail: fieo@nda.vsnl.net.in |
Exempting 4% Additional Customs Duty on imports by actual users
The 4% additional customs duty is Cenvatable and thus Government is not getting any revenue while at the same time it is blocking funds of manufacturers and thereby increasing their transaction cost.
If for any reason it is not possible to exempt this, then there should a provision for refund of this 4% ACD, if the manufacturer/importer provides evidence that the imported goods have been used for manufacture of products which are sold after charging necessary CST/VAT or cleared for export. This provision will be similar to the system of refund introduced in respect of imports by resellers.
CENTRAL EXCISE
Reducing excise duty on Watches
Excise Duty on watches is 16% with an abatement rate of 35%. Because of rampant smuggling estimated to account for between 50% and 75% of annual sales, it has not been possible for domestic producers to pass on excise increases to customers and this tragically affect the industry.
Watches priced less than Rs.500 are eligible for SSI exemption which encourages manufacturing of inferior quality products and smuggling of watch parts. In order to provide quality products to common man, watches priced below Rs.500 should be fully exempted from Excise Duty.
Rebate of duty paid on exported material
As per existing procedure, a merchant exporter procuring duty paid material under Cenvat Invoice (showing the value of duty included in the price) is denied any rebate. As a result, the merchant exporters are put under disadvantageous position affecting their exports adversely. Getting the rebate/refund of duty through fixation of Brand Rate of Duty Drawback is experienced to be cumbersome and time consuming, which further increase the transaction cost.
It is, therefore, suggested that rebate may be allowed to Merchant exporters also on producing the proof of export of the duty paid material.
Exempting CST on domestic purchase of Raw Materials under Advance Licence/Deemed Export
Levy of CST on domestic purchase of raw materials under Deemed Export/Advance Licence Procedure for manufacture of export products is a very serious unintended anomaly due to following reasons:
-
It is clearly stated policy of the Government that export products should not be subjected to any local taxes and levies.
-
LST/VAT is not applicable on domestic purchase of raw materials for manufacture for export products (it is adjustable/Refundable).
-
CST is not applicable on domestic purchase of raw materials by an Export Oriented Unit (it is refunded).
-
CST is also not applicable if raw materials under advance licence are imported.
-
In any case, the Government has already decided to completely do away with the levy of CST in the near future, even on domestic business activity.
It is suggested that domestic procurement of raw materials under Deemed Export/Advance Licence Procedure should be completely exempted from the levy of CST with immediate effect.
|
Dr. Dhawan calls on Himachal CM FIEO’s Northern Region Chairman Dr. R K Dhawan called on the Chief Minister of Himachal Pradesh, Prof. Prem Kumar Dhumal on 29th January and requested him to appoint an export commissioner as a nodal officer to promote exports from the state. Dr. Dhawan urged Prof. Dhumal to lay emphasis on improving industrial infrastructure in the state to boost exports. Speaking further, he suggested that Himachal Government should organize a series of seminars in association with FIEO on export related issues at Parwanoo and other industrial hubs. He also suggested organising reverse buyer-seller meets in Shimla and state focused exhibitions abroad in association with the Federation. |
 |
|
Dr. R K Dhawan (centre) exchanging views with the Chief Minister of Himachal Pradesh, Prof. Prem Kumar Dhumal. At extreme left is Mr. Sunil Agnihotri, Director, FIEO (NR) |
Extending EOU scheme for further 5 years
Industries which are now EOUs may not be in a position to switch over to SEZ scheme immediately as there are lots of pre requirements for SEZ scheme. A gradual switchover may be possible and hence EOU scheme should continue for five more years.
With strengthening of rupee against dollar, exporters are facing several problems and continuance of EOU Scheme for five years will give them a much needed breather to remain globally competitive.
SERVICE TAX
Exempting export units from Service Tax
The incidence of the Service Tax has been increased from 10% to 12% w.e.f. 18.4.2006. The list of services under Service Tax net has also been expanded. While reimbursement of input services used in manufacture of export product is possible through CENVAT route, for exporters who are registered with Excise Department (manufacturer exporters), there is no mechanism for refund of input services not used in manufacture of goods or output service like commission to foreign agents, warehouse charges, etc.
Further, the small manufacturers, who are either in non-excisable sectors or are exempted from the purview of Excise Duty, have to bear the incidence of Service Tax paid during course of exports. This makes their products uncompetitive.
Since levy of Service Tax is affecting the competitiveness of Indian industry, it is suggested that Ministry of Finance should provide exemption from Service Tax to exporting units.
Providing exemption instead of refund of all output service tax
The government has provided refund of service tax on seven notified services. However, the important services like commission to foreign agents, overseas travel expenditure, professional fees, and fees to CHAs, courier charges etc., are still not eligible for refund. Secondly, the whole process of refund is time consuming, requires lot of paper work and entails transaction cost.
The exporting community, therefore, seeks ab-initio exemption from payment of service tax on notified services. Such exemption can be subjected to random scrutiny of account. This will also reinforce the trust which the government places on the exporters.
Moreover, the refund of output service tax may also be allowed under the existing CENVAT Rules 2004 to dispense with the need to apply for refund. This may require some modification in CENVAT Rules which needs to be carried out immediately so that the processes become simpler and automatic.
Simplifying procedure for sanction of refund of unutilized credit/rebate claims in case of export
While the CBEC has issued a circular No.828/5/2006-CX, dated 20.04.2006, to facilitate quick and regular refund of service tax/excise duty to exporters, the procedure for such provisional sanction of refunds is that 80% of the rebate/refund claimed by select categories of exporters is paid within 15 days from filing of the rebate claim or filing of document evidencing payment of duty including the periodical return, subject to the claim, prima-facie, being found to be complete and in order.
|
Interactive Session on VAT
FIEO (Northern Region) is organizing an Interactive Session on VAT as per the following schedule:
Day & Date : Thursday, February 14, 2008 Time : 3.30 -5.30 p.m. (followed by high tea) Venue : KRIBHCO Auditorium, A-10, Sector 1, Noida-201301
The Session will give an opportunity to the exporters to share their suggestions, requirements and other issues related to VAT, sales tax, commercial tax etc. Mr. Sunil Kumar, IAS, Commissioner, (Commercial Tax), Lucknow (UP) has been requested to attend the meet and address the participants. Besides, Mr. Ajay Chauhan, IAS, Additional Commissioner, (Commercial Tax), Noida (UP) will also be present to interact with the participants.
For more details and participation, please contact, FIEO (Northern Region) at Tel: 011-46042118, 46042121, 46042172; Fax: 011-26148194; E-mail: fieo@nda.vsnl.net.in |
CBEC has further done away with the pre-audit of claims at the stage of provisional sanction of 80% of claims.
At present simplified procedure for sanction of refund/rebate claims has been restricted to select categories of exporters only, having proven track record. It is suggested that this may be extended to all categories of exporters.
Waiving requirement of documents for refund of Service Tax
The CBEC, vide Notification 40/2007 dated 17th September 2007, has allowed refund of services used in exports. These include:
-
Port services provided for export. (Sec 6S [105] [ZN] of the FA, 1994
-
Other Port services. (Sec 65 [105] [ZZl]
-
Services of transport of goods by road from ICD to Port of export provided by GTA. (Sec 65[105][ZZpl]
-
Services of transport of goods in containers by rail from ICD to port of export. (Sec 65 [105][ZZZpl]
The Revenue Department has later amended the notification stating that the benefit would be provided only if goods have been exported without availing drawback of service tax.
Besides, additional conditions have also been included - such as exporters not registered with Central Excise need to fill in a declaration with the respective Assistant Commissioner of Central Excise/Deputy Commissioner of Central Excise who would allot a service tax code within 7 days of receipt of form. Besides this, the tax authorities are to be given a copy of the written agreement entered into by exporter & buyer. (Even for the 3 service added later such as insurance/technical testing & analysis/ certification additional documents are required by tax authorities).
Further, if refund of service tax paid to GTA can be given for transport from ICD to port, then it should also be given from factory to ICD/factory to Port.
The supporting documents required may be waived for status holders and exporters with good track record and a self declaration may suffice as a trade facilitation measure.
BANKING
Rationalising export credit
| As on | Export Credit (Rs. Crores) | Export Credit as % of bank credit |
| Mar ‘00 | 39,118 | 9.8 |
| Mar ‘01 | 43,321 | 9.3 |
| Mar ‘ 02 | 42,978 | 8.0 |
| Mar ‘03 | 49,202 | 7.4 |
| Mar ‘04 | 57,687 | 7.6 |
| Mar ‘05 | 69,059 | 6.3 |
| Mar ‘06 | 86,207 | 5.7 |
|
Dec ‘06 |
97,763 |
5.6 |
[Source: RBI]
A differential of 4-6% in the cost of credit between India and other countries make Indian exports lose their competitive edge in the international market. FIEO Members have represented that a cap should put on the cost of credit, both for Pre & Post-Shipment, uniformly for a period of 360 days.
Following factors add to the cost of credit:
-
Incidence of interest levied after value date for inward remittance for exports
-
Interest rate of overdue bill or crystallized bill, etc.
Reducing cost of credit to bank rates
RBI vide circular no. DBOD.Dir.(Exp). BC.No.22/04.02.01/2007-08 dated July 13, 2007, has provided subvention in interest rates for 9 export sectors and SMEs with annual turnover less than Rs.10 crores by 2 percentage points.
It is requested that in order to provide a comparable field to the Indian exporter, the cost of credit may be brought down to bank rates.
Inspite of RBI directives, Banks passing ECGC premia to exporters (Post-Shipment)
It is suggested that since the banks are already taking the securities such as Stock and Book Debts; Collateral Security; Personal Guarantees of the Directors/Promoters & in the case of companies, corporate guarantees from the Group/Associated Companies from the exporters and levying service charges on various transactions (such as L/C advising charges, renewal cum enhancement of limit charges, stock audits, processing fee on non-funded limits, etc) the RBI may issue directives to the banks that the premia for the above policy of the ECGC may not be passed on to the exporter.
Financing Consignment Exports
In order to facilitate warehousing abroad and setting up of Display-cum-Workshop Centres outside India to meet the just in time delivery schedules, banks in India may adopt a liberal approach in financing consignment exports to developed country markets like US and Europe.
The concessional interest for pre-shipment credit for 360 days should be applicable from the date of shipment of the consignment to the date of sale while in case of post-shipment credit for 180 days; the concessional interest is made applicable from the date of sale from the warehouse to the date of receipt of the payment. Such a step will lead to a quantum jump in India’s exports to the US and other developed country markets.
|
Today Indian Customs are faced with the challenges of rapidly growing exports and imports. FIEO’s Northern Region Chairman Dr. R. K Dhawan said this while addressing a ceremony organized to celebrate International Customs Day at Indira Gandhi International Airport on 25th January. Dr. Dhawan said: "From the last five years, while our exports are surging ahead at an annual growth rate of approximately 24% in US Dollar terms, our imports are witnessing even higher annual growth at 32%, together throwing new challenges for Indian Customs. And with the ongoing integration of global economy, our trade growth would rise further and that entails more challenges for our customs in terms of manpower requirement and other resources." |
|||
|
Facilities under Gold Card Scheme
The Gold Card Scheme has been made operational for status holders with a consistent track record and sound bonafides.
It is suggested that in order to make the scheme more effective, Gold Card Holders may be allowed to open bank accounts anywhere in the world in the correspondent banks of the Indian Bank(s) of concerned exporter. Such amounts can be routed through Indian banks, if so required. The status holder may be allowed to issue foreign currency cheques to various agencies since the bank accounts will be in the country where the currency has clearing facility and payments can easily be made by cheque.
Further, as per RBI guidelines Banks may consider waiver of service charges for Gold Card Holders particularly for processing charges in the case of renewal of limits where there is no change in the sanctioned limits.
Facilitating third country exports & Merchanting Trade
The authority for raising purchase orders and other related transactions with reference to third country export may be delegated to ADs so that there is no delay in execution of such projects abroad.
|
Prior permission is required from RBI for accepting advance towards capacity booking for exports which takes a substantial amount of time. The manufacturing capacities of the concerned exporter are booked in advance by subsidiaries based abroad. Advance payment against export orders is permitted and the goods are to be shipped within one year. The cap of one year causes inconvenience to the exporter. Simplifying procedures for Project Export Under the procedures prescribed in the Project Export Manual, consultancy projects to be undertaken by Indian Consultancy organizations are required to be approved by a Competent Authority, both at pre-tender and post-tender stages. If the consultancy contract is for less than Rs. 5 crore, then these clearances have to be obtained from the respective Authorized Dealer of foreign exchange and if the value of the contract is between Rs.5 crore & Rs.10 crore, then the approval is required from Exim Bank. If it exceeds Rs.10 crore, the approval is to be obtained from the Working Group consisting of members from Exim Bank, RBI, ECGC and the Authorized Dealer/the Commercial Bank of the Consultant. The requirement of getting prior clearances from the concerned authorities for such consultancy contracts which are on cash basis and are with the Overseas Government Agencies and are also funded by multilateral funding agencies may be dispensed with by suitable amendments in PEM procedures and FEMA. |
Mr. Baliram Narayan Ambre retires |
|
|
|
|
Mr. Baliram Narayan Ambre, Jr. Assistant retired from the services of the FIEO on 31st January, 2008 (A/N) after serving the Federation for 22 years. Mr. Ambre joined FIEO on 25th March 1986 and during his service he discharged his duties and responsibilities honestly and sincerely. FIEO wishes him good health and long life. |
Allowing Indian manufacturers subcontracting abroad
FEMA does not allow Indian manufacturers to get the goods fabricated/manufactured abroad by sub-contractors for supplies in India or as part of exports. Many times for large export orders, Indian manufacturers have to get sub-assemblies manufactured by sub-contractors abroad, for cost effectiveness, faster delivery, quality, etc. Indian manufacturers should be allowed get goods manufactured by sub-contractors abroad. This will help the Indian exporters immensely.
Allowing payment of overseas commission by exporters
At present, for supply contracts, exporters can make agency commission payments to overseas agents only after the shipment is made and the payment is realized. In large capital goods the time taken from offer to shipment and realization of payment is very large, sometime more than 12-24 months. Many agents are demanding commission immediately on receipt of orders and advance. They are not ready to wait for such a long time. Hence, exporters should be allowed to make payment of commission to agents once they receive advance payment from the customers. This would help them procure more orders.
Treating supplies made in India against payment in ‘free foreign exchange’ as exports
Many overseas customers buy goods in India for their projects/plants in India and make payments in foreign currency. At present, such sales attract all taxes and duties. It is suggested that such sales should be treated as exports and exempted from all taxes and duties.
Relaxing bank approval for free of cost supplies during warranty period
Capital goods manufacturers have to supply goods/components, etc. on ‘Free of Cost basis’ during warranty period. If the value of the item is more than Rs. 25,000, then Customs Authorities insist on approvals from the Bank/RBI. RBI may consider relaxation at least during warranty period.
