FM asks states to refund taxes to Re-hit exporters
FINANCE minister P Chidambaram on Wednesday asked state governments to help rupee-hit exporters by refunding local taxes, including Vat, octroi and electricity duty, as taxes should not be exported. “At present, the number of taxes, including Vat, octroi and electricity duty, are borne by exporters. They should be rebated or refunded, and I will urge state governments to look into this issue carefully,” Mr Chidambaram said at the 54th meeting of the National Development Council. “The union government has announced major relief packages, and we are hopeful that these will bring some measure of relief to exporters. However, regardless of the exchange rate or any other external circumstance, it is a universally accepted principle that taxes shall not be exported,” he said. The Central government rebates or refunds every tax that is payable or paid and if attributable to goods and services that are exported, he said. He said any state which relieves exporters of tax burden will tend to gain as more export oriented industry would come up there. “Hence, it is in the long-term interest of the state to rebate or refund all taxes on exports,” he said. Meanwhile, expressing concern at the lack of efficiency in the public distribution system, he said: “Many observers have pointed out that the era of cheap food prices is over. In the changed context, the relevance of an efficient public distribution system cannot be over emphasised. We need a PDS for the poor, but unless it is efficient — procures adequate quantities of foodgrains and delivers food to the poor — the PDS could become an albatross around our neck and an opportunity for rent seekers to enrich themselves. He said the Centre spends Rs 3.65 to transfer Re 1 to the poor. “About 58% of the subsidised grain do not reach the target group, of which a little over 36% is siphoned off the supply chain,” he said. Pointing out that the first concern is procurement of adequate quantities of wheat and paddy or rice, he said producing states must cooperate with the Central government and its agencies. “I urge chief ministers to collectively resolve today to help the Central government set right both sides of the PDS – procurement and distribution – because a well functioning PDS is critical to maintaining price stability of food articles,” he said. He appealed to the wheat and paddy producing states to procure and contribute their fair share of foodgrains to the central pool. “Some wheat producing and rice producing states have contributed meagre quantities to the central pool, yet they draw from the central poor for their PDS. How is this fair to the states which bear a disproportionate share of the burden of procurement?” he said. On infrastructure development, he said unless the 11th Plan target of each of infrastructure areas like roads, ports, railway lines and power plants are achieved, it would be difficult to reach the goal of 10% GDP growth in the terminal year of the plan. “We need to go forward with a greater sense of urgency in building roads, ports, railway lines and, above all, power plants. Virtually every project, we are told, faces difficulties in the matter of land acquisition, environmental clearance, road connectivity and availability of water,” he said