New Delhi, March 1: Exporters have denounced raising of service tax from 10% to 12% in the Budget on the ground that it will further erode their competitiveness. They claim that a majority of exporters are not in a position to seek compensation as they are either not covered under Cenvat or have excess Cenvat credit which will now go up further.
Federation of Indian Exports Organisation (Fieo) president OP Garg on Wednesday suggested that services used during the course of exports should be exempted from service tax or necessary refund should be allowed to exporters under different schemes.
Agreeing with Mr Garg, Delhi Exporters Association (DEA) president SP Agarwal said that the increase in service tax rate and expansion of tax net would increase operating costs for exporters, which was something that they could ill-afford.
Mr Agarwal added that continuation of fringe benefit tax (FBT) on first class air travel would affect exporters adversely because a number of times exporters had to travel business class to accomany their clients.
Mr Garg said that the approach on FBT has been half hearted. He pointed out that the government should reconsider exempting sales promotion expenses from the ambit of FBT particularly in respect of exports by individual exporters.
Fieo appreciated the reduction ofe peak duty on non-agriculture products from 15% to 12.5% and the road-map drawn for moving towards uniform goods and services tax (GST) by 2010.
The reduction in customs duty on key textiles inputs, rationalisation of excise duty on manmade fibre and filament yarn together with increased allocations under Textiles Upgradation Fund would give a boost to textiles exports, he said.
