"Indian Budget 2012 Special": Exporters unlikely to get tax incentives

With the government hard pressed to reduce fiscal deficit, exporters are unlikely to get tax incentives in the Budget for 2012-13 to be presented by finance minister Pranab Mukherjee next month. "Finance ministry's fiscal room for manoeuvre has gone. They are in a tight fiscal situation, who is going to give you sops," a senior commerce ministry official said. In order to arrest deceleration in export growth, the Federation of Indian Export Organisations (Fieo) has urged the government to give complete exemption of excise duty on handmade carpets, reduction of excise duty on man-made fibres and service tax exemption on ECGC premium and on currency conversion for exports. The exporters are also demanding exemption of minimum alternative tax on special economic zones, key exporting hubs. From a peak of 82 per cent in July 2011, export growth has slipped to 44.25 per cent in August 2011, 36.36 per cent in September 2011, 10.8 per cent in October last year and 10.1 per cent in January.

Mukherjee, according to the official, may not provide tax incentives as his foremost priority would be to bridge the fiscal deficit, which is the gap between revenue and expenditure. During the current year, the fiscal deficit is expected to exceed the budget target of 4.6 per cent of the Gross Domestic Product (GDP), mainly on account of rising subsidy bill and poor realisation from sale of equity in state-owned companies. Commerce secretary Rahul Khullar has recently said that the country's exports are going to face difficulties during the coming months due to the global economic uncertainties. However, exporters too are not optimistic about announcement of fiscal incentives in the Budget. "Looking at the current revenue situation of the government, we are not expecting much in the Budget. It is not possible for the Finance Minister to extend fiscal benefits to us," Fieo Director General Ajay Sahai said. In the last Budget, the government had allowed exporters to do self-as customs authorities, a moved aimed at fastening the clearance of the cargo by customs authorities. The finance minister also allowed duty-free import of some inputs used in the manufacture of leather and textile products for export purpose.