FM asks states to chip in to help exporters

NEW DELHI: Finance minister P Chidambaram on Wednesday asked state governments to help rupee-hit exporters by refunding local taxes, including VAT, Octroi and electricity duty, as taxes should not be exported.

“At present, the number of taxes, including VAT, Octroi and electricity duty, are borne by exporters. They should be rebated or refunded, and I will urge state governments to look into this issue carefully,” Mr Chidambaram said at the 54th meeting of the National Development Council.

“The Union government has announced major relief packages, and we are hopeful that these will bring some measure of relief to exporters. However, regardless of the exchange rate or any other external circumstance, it is a universally accepted principle that taxes shall not be exported,” he said.

The Centre rebates or refunds every tax that is payable or paid and if attributable to goods and services that are exported, he said. He said any state which relieves exporters of tax burden will tend to gain as more export-oriented industry would come up there. “Hence, it is in the long-term interest of the states to rebate or refund all taxes on exports,” he said.

Meanwhile, expressing concern at the lack of efficiency in the public distribution system (PDS), he said: Many observers have pointed out that the era of cheap food prices is over. In the changed context, the relevance of an efficient PDS cannot be over emphasised.” The country needs PDS for the poor, but it must be efficient, he added.

He said the Centre spends Rs 3.65 to transfer Re 1 to the poor. “About 58% of the subsidised grain does not reach the target group, of which a little over 36% is siphoned off from the supply chain,” he said. Pointing out that the first concern is procurement of adequate quantities of wheat and paddy or rice, he said producing states must cooperate with the Centre and its agencies.

On infrastructure development, he said unless the 11th Plan target of each of infrastructure areas like roads, ports, railway lines and power plants are achieved, it would be difficult to reach the goal of 10% GDP growth in the terminal year of the Plan.