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The commerce ministry is upset over "pittance" being considered by the revenue department for exporters facing the brunt of appreciating rupee. Against the demand of service tax exemption for 14 more items, the finance ministry is willing to extend the benefit to just one additional item - that of participation in exhibitions and trade fairs abroad. The service tax exemption on this is likely to be notified later this week.
The bits and pieces approach will not be of much help to exporters who are facing unprecedented crisis and are being forced to lay off workers in their units," a senior commerce ministry official said. The rupee has risen almost 12.5% against the dollar in 2007 impacting export growth and raising concerns among exporters that the 160 billion dollar target for the current fiscal would not be met. The official said exporters are being hit hard by a rising rupee and high interest rates, and the government needs to extend a comprehensive relief package that takes care of these problems.
Finance minister P Chidambaram had held discussions with exporters from the worst-hit textile sector along with bankers for considering what additional relief could be provided. According to sources, banks are not willing to give credit at rates lower than those effective at present. The current rates for exporters are already lower than the normal credit charge for other sectors. While banks are claiming the subvention cost from the government, they are not extending the same to the exporters on the ground that they already had a gap in financing the export sector," the official said.
The government had already announced relief measures in July and October aggregating to Rs 5,000 - 5,200 crore. The package included a 2% interest subvention for pre and postshipment credit, which banks were supposed to bill to the government, and payment of interest on exchange earners foreign currency (EEFC) accounts.
Service tax exemption has been provided on seven items for exports against the commerce ministry's demand of 21 services.
Source: The Economic Times
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