FM asks states to refund taxes on exports

The Centre today asked state governments to help rupee-hit exporters by refunding...

The Centre today asked state governments to help rupee-hit exporters by refunding their taxes as it has already given three packages to the sector involving around Rs 5,200 crore. “At present, a number of taxes are borne by exporters. They should be rebated or refunded, and I will urge state governments to look into this issue carefully,” finance minister P Chidambaram said at the 54th meeting of the National Development Council.

He said any state which relieves exporters of tax burden tends to gain as more exporters oriented industry would locate there. “Hence, it is in the long-term interest of the state to rebate or refund all taxes on exports,” the minister said. He said exports are under some stress due to the rapid appreciation of the rupee against the week dollar. “The Government has announced major relief packages and we are hopeful that these will bring some measure of relief to exporters,” he said.

However, regardless of the exchange rate, or any other external circumstance, it is an universally accepted principle that taxes would not be exported. “The Central Government rebates or refunds every tax that is payable or paid and if attributable to goods and services that are exported. I submit that state government should do the same,” he said.

Story continues below this ad

The minister said unless the Eleventh Plan target of each of infrastructure areas like roads, ports, railway line and power plants are achieved, it would be difficult to reach the goal of 10 per cent GDP growth in the terminal year of the plan. The minister said the world faces challenges of food availability and their rising prices.

“We need a PDS for the poor, but unless it is efficient, procures adequate quantities of foodgrains and delivers food to the poor, the PDS could become an albatross around our neck and an opportunity for rent seekers to enrich themselves,” Chidambaram said.

He said the Centre spends Rs 3.65 to transfer Re 1 to the poor. “About 58 per cent of subsidised grains do not reach the target group, of which a litter over 36 per cent is siphoned off the supply chain,” he said. Pointing out that the first concern is procurement of adequate quantities of wheat and paddy/rice, he said producing states must cooperate with the central government and its agencies.

He appealed to the wheat and paddy producing states to procure and contribute their fair share of foodgrains to the central pool. “Some states have contributed meagre or nearly zero quantities to the central pool, yet they draw from the central poor for their PDS. How is this fair to the states which bear a disproportionate share of the burden of procurement?” he said.