|
||
|
|
|
|
Supporting Exporters - Need of Hour
OCTOBER 7, 2013 By Bala Raja Rajan, CA, B Com, FCA INFLATION has gone up, rupee value has come down. Current Account Deficit is increasing day by day and RBI is not keen on reducing the interest rates. India is witnessing all these. Enough has been spoken, written, discussed
Experts have given various reasons for the economy slowdown and many columnists have expressed their concerns on many global issues such as -
Measures like dis investment in PSUs, giving clearances in respect of various FDI deals, allowing FDI Investment in Retail, requesting the public in large not to buy gold may help the Indian economy. Though it is a theory that if imports are more than exports there exists a trade deficit, it is not realistic that increase of exports of goods & services is possible when there is no absorption in the global market. In other words, unless there is a global demand, Indian exporters cannot export their goods & Services. GST is a day dream. Increase in Customs duty on Gold will nonetheless help the smugglers. Expecting exemption of excise duty, service tax on few goods & services, from the revenue driven Govt. is quite impossible. Infact, even if given it will only create a problem in the CENVAT chain and may result in more litigation. Crux of the issue is that if exporters have to sail in turbulent waters, they require a helping hand. Specifically, the service providers have to be taken care at this juncture, as they are the major contributor to the GDP. By incentivizing them, it not only helps them to focus on exports but it also helps the Indian Economy to overcome the present crisis on account of trade deficit. This article deals with the scrips issued under Chapter 3 of FTP. Brief History on Duty Credit Scrips: Chapter 3 of the FTP allows for issue of duty credit scrips to exporters under the -
Ministry of Commerce with the intention of encouraging the exports has allowed the exporters to use the duty credit scrips in many ways. However, due to lack of clarity in the procedure and absence of corresponding Notifications/circulars from CBEC,the benefits seem to have been stalled although some issues have been sorted out. These are as below -
Clearing the First Impediment: Department has denied the CENVAT benefit by stating that Rule 3 of the CENVAT Credit Rules, 2004, which provides for allowing CENVAT credit of the specified duties of Customs/Central Excise are not allowing CENVAT credit on the strength of the duty debited through DFCE/Target Plus Certificates in the absence of an express provision in the said Rules. In fact their argument is Duty credit scrip/DEPB pass book are not valid documents under Rule 9 of CCR, 2004. After representation, CBEC has clarified that the additional customs duty paid in cash or through debit in certificate issued under DFCE/Target Plus Scheme can be availed of as CENVAT credit or duty drawback vide their Circular No. 27/2006-Cus., dated 13-10-2006. CBEC has proactively issued notifications on 9 th July 2012, when the FTP was amended to allow duty credit scrips to be used to pay excise duty on domestic procurement, that the holder of the scrip, to whom the goods were cleared, shall be entitled to avail the drawback or CENVAT credit of the duties of excise against the amount debited in the said scrip and validated at the time of clearance. With this, CBEC has avoided needless litigation which could have risen. Clearing the Second Impediment: CBEC has clarified that duty credit scrips of these schemes are allowed for clearance of goods from Custom Bonded warehouses under the same procedure as prescribed for DEPB scrips under Circular 68/2000 dated 18.8.2000 and 72/2003-Cus dated 11.8.2003 and subject to the conditions and limitations mentioned in FTP, vide their circular no. 50/2011-Customs dated 9th November, 2011. Clearing the Third Impediment: In 2006, SFIS scrips were allowed to be utilised for excise duty payment on goods sourced domestically. With effect from 5th June, 2012, other duty credit scrips were also allowed to be utilised towards excise duty payment on goods procured from domestic suppliers. This was an important measure for import substitution which in turn helps to reduce the Current Account Deficit. Department of Excise, is still treating this transaction, removal of goods under Scrips for the purpose of Rule 6 of CENVAT Credit Rules, 2004 as “Exempted Goods” and thereby the manufacturers are require to pay 6% of the value of the goods in lieu of reversal of the Cenvat Credit, as per Rule 6 (3) of CCR, 2004. Hon'ble Gujarat High Court in the case of CCE-Vadodara-II vs.Voltamp Transformers [Tax Appeal No. 288 of 2012] has upheld the decision given by the Tribunal - (2011-TIOL-1708-CESTAT-AHM) that the duty liability which has been debited in the SFIS scrip, would amount to discharge of duty liability and not amounting to exemption, as was proposed by Revenue." Even in the case of Universal Power Transformer Pvt. Ltd - (2010-TIOL-985-CESTAT-BANG), Tribunal held that on goods cleared without duty payment against debit to SFIS scrips, does not amount exemption. As such, it is high time that CBEC amends the CENVAT Credit Rules to clear the position that these goods will not be considered as Exempted. Clearing the Specific Issues in respect of SFIS: The Served From India Scheme (SFIS) was introduced in 2004 to accelerate growth in export of services and at the same time create a brand as “Served From India”. The said scheme is devised in such a way to strengthen the service providers' hand by allowing them to import capital goods at lower import duties. The SFIS duty credit scrip or goods imported/procured under the scrip can now be transferred within group companies or managed hotels. Recently, following is added at the end of existing Para 3.12.6 (b) of the FTP, “Utilisation of Duty Credit Scrip shall also be permitted for payment of duty in case of Import/ domestic sourcing of motor cars, SUV's and all purpose vehicles as Professional Equipment by Hotels, Travel agents, Tour operators or tour transport operators and companies owning/operating golf resorts. Such vehicles (operating on road and requiring registration) will have to be registered for Tourist purpose only. Proof of registration will need to be submitted to RA concerned within 6 months of import/domestic procurement.” So also, duty credit scrips issued under FPS, FMS and VKGUY can be used for payment of service tax. This amendment is with effect from 18 th April 2013, however duty credit scrip issued under SFIS is not allowed to use for payment of service tax. Conclusion: Both Ministry of Commerce and CBEC have to come to rescue of the industry by bringing in clarity and provide necessary amendments on the following fronts -
|
