IT, electronics cos want export sops to stay

By siliconindia   |   Monday, 12 January 2004, 20:30 IST
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NEW DELHI : While the BJP government takes the notifications route to announce 'budgetary' sops, a similar move is seen a certainty for Exim policy too. So much so that, industry associations have started sending in their demands with sudden urgency. The Electronics and Computer Software Promotion Council (ESC) has urged the government to continue to give exemptions to profit earned from the sale of the ‘duty entitlement passbook (DEPB) licence’, and to make the announcement now rather than wait till ’07 to roll over the scheme. This is expected to induce electronic hardware manufacturers to relocate their production bases here. The DEPB licence is a customs scheme under which exporters are refunded duties paid by them for import of inputs, raw materials and components at the time of export of the finished product. Specific rates are prescribed for levies and these are revised periodically. Chairman of ESC, PK Sandell, said that the tax exemptions would help sustain the exports growth by ensuring the flow of inputs. Withdrawal of tax exemption to sale proceeds from DEPB licences would adversely impact small and medium enterprises who rely on these sops to survive in an export scenario where margins have come down drastically, he said. There has been confusion over whether profit from the sale of DEPB is eligible for computation for deduction under section 80 HHC of the Income Tax Act, in the light of litigations over claims. The Central Board of Direct Taxes has set up committees and elicited expert opinion on the matter. Giving its reasoning, ESC has pointed out that DEPB benefits are allowed in the form of credit, which is as good as a cash incentive given for export activities. There is no incongruity or irregularity for allowing such incentives in the form of tax deductible under Section 80HHC, as this section has given the definition of cash assistance a broader meaning. “Any assistance in cash or credit is permissible under the ambit of this section. World-over such incentives are given for exports in one form or another and are not likely to attract objection from WTO,” Sandell said. According to him, 95% of exports are denominated in terms of dollars. And the hardening of the rupee against the dollar has led to a fall in export proceeds. (Source: Economic Times)