U turn on 'export tax' policy?

ameya's picture


I am baffled to read statement relating to taxes in today's speech by the Finance Minister.  While outlining 10 points agenda, FM stated that - "We must focus on manufacturing and especially on manufacturing for export. I propose that all taxes, Central and State, that go into an exported product should be waived or rebated." 

This appears to be a complete U-turn on the policy and reflects Government's inconsistent stand. In facts, the same Government in the last 3-4 years has done away with income tax incentives associated with exports - for example - 
- Income tax holiday u/s 10B on EOU exports (relating to manufacturing) was done away with since April 1, 2011.
- In the same year, Govt introduced 18.5% Minimum Alternate Tax (MAT) on profits earned by Special Economic Zones (SEZ). 
MAT on SEZ in fact has significantly impacted cash flows associated with large SEZ investments meant to facilitate exports.   In fact, the Government is also defending its decision to MAT levy in various courts too.
Hopefully, there is a clear policy statement on this point by the new Government later this year, without further flip-flop.