New Delhi: The government has decided to end a tax incentive scheme for exporters on 30 June, the revenue secretary said on Wednesday, as the export industry in Asia’s third-largest economy was doing well and needed no incentives.
Speaking to reporters, Sunil Mitra said the government faced an estimated annual loss of Rs8,000 crore ($1.77 billion) from the Duty Entitlement Pass Book scheme (DEPB), which began in 1997.
“We really feel that we are rewarding exports on one hand and losing revenue on the other hand,” Mitra said.
“It will be phased out on 30 June. That is the finance ministry’s decision,” he told reporters.
The DEPB scheme is a tax incentive scheme for exporters under which the government reimburses about $1.8 billion a year to exporters on taxes paid on imported supplies.
“It will still give some relief to exporters if taxes are reimbursed under the drawback scheme,” Ramu Deora, president of the Federation of Indian Export Organisations (FIEO), said.
The duty drawback scheme is an export incentive scheme also offered by the Indian government that neutralises levies paid on inputs with rates fixed annually, based on the duty structure in the budget.
Last week, commerce secretary Rahul Khullar said India’s April exports surged by more than a third on demand for engineering goods, gems and oil products.
India’s merchandise exports rose an annual 37.5% to about $246 billion in the last fiscal year, surpassing the initial target of $200 billion.
India hopes to achieve at least 25% exports growth in the 2011-12 fiscal year that ends in March, and aims to double its merchandise exports within three years, commerce and industry minister Anand Sharma had said last month.
In April, the government rolled back a 2% interest subsidy paid to exporters, as it seeks to rein in fiscal deficit -- estimated at 4.6% of gross domestic product in 2011-12.