Exempt export income from income tax: Assocham

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Exempt export income from income tax: Assocham
Given the gravity of the situation on the current account deficit and the widening trade gap, apex industry body ASSOCHAM today suggested total exemption of export income from the income tax at least for a period of three years or till the time merchandise exports cross USD 500 billion.

"The Commerce Ministry, which is giving final touches to the annual supplement of the Foreign Trade Policy (FTP) should press for exemption to the export income....", said The Associated Chambers of Commerce and Industry of India (ASSOCHAM).

The exemption to export income should also be given to the services exports. "With this action which will surely be a bold step, the economic activity will revive across the sectors," said ASSOCHAM.

The apex chamber further said that situation on the export front, as highlighted by the Reserve Bank of India, calls for extra-ordinary steps as the current level of current account deficit (CAD) of 6.7 per cent of the Gross Domestic Product is not sustainable. Even if CAD finally works out to five per cent of the GDP for the entire financial year of 2012-13, it cannot be sustained, especially when exports remain subdued and fund inflows into the stock market have become uncertain.

"At least in the third quarter of the FY 13, the FIIs came handy for financing the CAD. The situation has now changed with the FIIs turning out to be net sellers. While the export deceleration seems to have bottomed out, nothing is certain as yet as almost entire European market is not turning around giving a big setback to mainline export items like engineering goods," said ASSOCHAM.

It said achieving the ambitious target of USD 500 billion by FY 2014-15 "looks next to impossible" under the given global scenario. Even the World Trade Organisation has projected a sluggish world trade growth of only 3.3 per cent in the year 2013 as the economic slowdown in Europe continues to suppress demand for imports in the economically troubled continent. The world trade had fallen to just about two per cent in 2012 from 5.2 per cent in 2011.

ASSOCHAM said, "It should become a national endeavour to ensure that exports grow by leaps and bounds. That is possible only when selling in the exports markets become much more attractive. In the present global trade scenario the only way the exports business becomes more attractive than the domestic market would be through tax exemption,".

"As higher exports would reduce the trade deficit, the pressure on the current account deficit, the highest ever, would abate with several positives including currency stability," said ASSOCHAM. It also said that the depreciation in the rate of rupee has not really helped the exporters since the cost of imported raw material for export products has also gone up.

As a spin off exports to most emerging and developing markets have also decelerated.

Source: Assocham

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