Union Budget 2019 Expectations: Finance Minister Nirmala Sitharaman's maiden budget comes at a time when India is facing heat from the US for being a "tariff king". So her speech will be closely watched for announcements in customs duties. Meanwhile, according to the Trade Promotion Council of India (TPCI), exports from India are also facing challenges owing to multiple global geo-political and economic developments. Against this backdrop, a key pre-budget demand from the trade associations involved in import and export is that the government should announce steps to boost India's cross-border trade.
The Federation of Indian Export Organisations (FIEO), for one, wants the new government to address issues related to infrastructure bottlenecks for enhancing competitiveness of India's exports. Going a step further, TPCI has recommended that the Modi 2.0 government should incentivise the exporters whose "geographical diversification is more, and not concentrated in terms of outreach," IANS reported. In addition it has sought incentives for sectors where India has a huge competitive advantage in exports, such as furniture and electricals.
The organisation further stated in a statement that the government should permanently exempt goods procurement under certain export promotion schemes from the Integrated Goods and Service Tax (IGST) and compensation cess. These exemptions apply to exporters buying inputs domestically or importing for export purposes under export oriented unit (EOU) scheme, Export Promotion Capital Goods (EPCG) scheme and advance authorisation. EPCG is an export promotion scheme under which an exporter can import certain amount of capital goods at zero duty for upgrading technology related with exports. The relief is otherwise supposed to end in March 2020.
Trade associations have also emphasised the need for research and development (R&D) in the economy, which is the backbone for sustained growth of any industry. The Engineering Exports Promotion Council (EEPC) of India wants Budget 2019 to do away with any duty on imports made for R&D in the country, thereby enabling more investments in this sector.
The government could consider imposing conditions like DSIR certification, R&D with minimum staff of 30 personnel, grant of minimum five patents, etc, for availing zero duty, the EEPC noted its budget recommendations. "This will help to develop new products, and compete with other international players. Currently, any import for R&D is subject to 5 per cent duty, along with a lot of paperwork and approvals," it added.
In a similar vein, FIEO has reportedly recommended a review of the Section 35 (2AB) of the Income Tax Act, which provides a weighted tax deduction on R&D as well as product development. The Finance Act, 2016, brought down the tax deduction from 200 per cent to 150 per cent, effective from April 2017 to March 2020, post which it would be phased out to 100 per cent. However, the exporters' body wants the deduction to be restored back to 200 per cent on the grounds that R&D investment in India is a mere 1 per cent of GDP. Moreover, since most of it is currently done at the behest of the Government or in sectors like pharma, some sops would be helpful.
With PTI inputs