CAduniya.com : CA India Blog

n a move that could boost profitability of exporters, the government is considering issue of duty-free scrips to offset various state-level taxes. The levies include sales tax on petroleum products, central sales tax (CST), electricity duty, octroi, mandi fees, purchase tax, octroi, development tax and toll tax.

The education cess and similar levies should also be neutralised through the proposed duty-free scrips, which can be used by exporters to pay Customs duty on imported inputs, the department of commerce has said in a Cabinet note on the proposed replacement for the popular duty entitlement passbook (DEPB) scheme.

Exporters could save up to 4% of the value of their exports through the new instrument and this would provide substantial boost to them at a time when rupee appreciation has made international competition stiffer, officials said.

While sales tax on petroleum products is over 20% in several states, others levy 25% electricity duty. States such as Gujarat and Goa charge 25% on the power generated by companies for captive use, trade sources said.

Similar is the view in the case of octroi, mandi fees, purchase tax, toll tax and development tax. These may be small levies, but they add up to a substantial amount, accounting for an estimated 4% of the value of the goods exported. The commerce ministry’s proposal has been forwarded to the department of revenue, law ministry and the Planning Commission, officials said. It is likely to be taken up by the Union Cabinet soon, they added.