Address Inverted Duty Structure in Budget: Trade Body to Government

New Delhi: The Federation of Indian Export Organisations (FIEO) has asked the government to address the inverted duty structure in certain sectors like electronics in the upcoming budget to boost exports.

In its pre-budget recommendations to Finance Minister Arun Jaitley, exporters' body FIEO has also asked for creation of an "export development fund" in order to support MSME exporters.

"The corpus of the fund should be 0.5 per cent to 1 per cent of export value so that sizable money is available to promote MSME exports," it said.

Inverted duty structure in respect of various items in sectors like chemicals and tyres may be given due consideration in the Union Budget as it not only affects exports but also the manufacturing sector and adversely hits Make in India, it added.

An inverted duty structure impacts domestic industry adversely as manufacturers have to pay a higher price for raw material in terms of duty while the finished product lands at lower duty and costs lesser.

"The actual refund mechanism for service tax is cumbersome and time taking which blocks the working capital of exporters. Hence, the demand of exporting community is that service tax should be exempted for exports," it added.

The exporting companies may be given tax benefits on creation of employment as it will help in bringing workers into organised sector.

Exports dipped for the 14th month in a row, down 13.6 per cent in January to $21 billion due to fall in shipments of petroleum and engineering goods, although trade deficit showed improvement.

Imports shrank 11 per cent to $28.71 billion last month, resulting in a trade deficit of $7.63 billion, lowest in eleven months. In February last year, the deficit was $6.85 billion.