FIEO for Turnover Tax in lieu of Income Tax
Federation of Indian Export Organisations (FIEO) President Mr A. Sakthivel, in his Pre-Budget Memorandum to the Finance Minister, has recommended “Turnover Tax” in lieu of Income Tax for exporters. This is meant to reduce the administrative burden on exporters and creating a more conducive environment for entrepreneurs. Such a tax will dispense with all other direct taxes and exemptions including depreciation. The tax can be collected through banks at the time of receipt of foreign exchange to plug any leakage and will eliminate cost of collections.
FIEO also recommended incorporation of investment-linked tax incentives for the labour intensive MSME sector to enable investment in capital machinery and equipment. With the same objective in mind, FIEO suggested enhancing the depreciation rate from 15% to the previous level of 25%.
To provide competitive credit rate to exporters, Mr Sakthivel proposed to fix the rate for export credit at 6% without any linkage with BPLR. Similarly, export credit in foreign currency may be made available at LIBOR+ 100 basis point which was in vogue prior to the liquidity crises. FIEO has also suggested a host of measures to reduce the high transaction cost, including charges of renewal of limit fee, which should be applicable only for the enhanced limit at a rate of 0.25% with a cap of Rs 5 lakh for MSME units and Rs 10 lakh for those other than MSME units.
With regard to GST, FIEO proposed to dispense with registration for units with turnover up to Rs 1.5 crore. For customs duty Mr Sakthivel recommended that the government immediately address the inverted duty structure for a few products and provide a mechanism for refund of credit balance in the Central Excise CENVAT account emanating from reduction in excise duty.
The FIEO chief also reiterated his demand to provide exemption from service tax both to exporters as well as export promotion councils/FIEO and other export organisations.
To encourage modernization and expansion of manufacturing, Mr Sakthivel has recommended increasing the maximum investment limit in plant and machinery for medium enterprises from Rs 10 crore to Rs 25 crore.
Mr Sakthivel added that exports are entering a very crucial phase in 2010-2011 as uncertainty still looms large over the global trade on account of withdrawal of stimulus by countries which was propelling growth in the past.
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