Exporters want income tax levied under 80HCC to go

NEW DELHI: Alleging that transactions costs have shot up, exporters have demanded full income tax (I-T) exemption under Section 80 HHC of the Income Tax Act. They have also criticised the 10% surcharge imposed on annual income in excess of Rs 8.5 lakh and increased service tax.
Under Section HHC of the I-T Act, exporters enjoy exemption on only 30% of their income, they have to pay tax on the rest according to a phaseout plan worked out by former FM Yashwant Sinha.
However, the Delhi Exporters Association (DEA) has suggested that the entire income should be tax-exempt, given that exporters face stiff competition in the world market. DEA president SP Agarwal said this facility should be available till India’s share in global exports touches 5%. WTO permits support to exports for countries which have a per capita income of less than $1,000.
However, the Indian government seems to be in a hurry to do away with exemptions, Mr Agarwal said. Transaction costs are up because 20 of the services exporters use have fallen into the tax net. The service tax rate has also been increased to 8% from 5%.
Exporters want to be free from service tax and the proposed value added tax (VAT), which will replace sales tax from April 1. According to Mr Agarwal, paying VAT first to avail of refunds later blocks funds. The increased petroleum product prices will raise the freight and packaging material costs, he added.