In a move aimed at finding a permanent mechanism for refund of state level taxes to exporters, the commerce ministry will approach the 13th Finance Commission next month suggesting measures to reduce the incidence of local taxes on exports.
With the state levies accounting for 6 per cent of the cost of exporters' consignments, the ministry wants to ensure that these taxes are rebated on the lines of refund of Central levies through different schemes.
"As the Indian exports face cut-throat competition in the global market, we do not want to export taxes," a senior commerce ministry official told PTI.
He said one of the options being submitted to the Finance Commission is that the Centre refunds the local levies and then deducts it from the state's allocation.
The commerce ministry has been able to get 'trade' included in the Terms of Reference of the 13th Finance Commission. "It is for the first time that 'trade' has been included in the Terms of Reference. We are working on the memorandum and will submit it to the commission by May," he said.
He said while the commerce ministry has already circulated a Cabinet note for refund of state taxes, the proposal may not be pursued, with the Finance Commission coming into the picture.
Hit by erosion of margins by a sharp rise in rupee value, particularly against dollar, exporters have been seeking refund of various levies like octroi, mandi tax and electricity duty on the lines of reimbursement of central taxes.
The government has announced tax refund on about 15 services.
"The government is looking into formulation of a scheme for rebating state taxes with urgency. The remaining issues regarding refund of service tax on services linked to exports will also be resolved shortly," Commerce and Industry Minister Kamal Nath has said.
Exports for 2007-08 fell short of the targeted $160 billion and stood at over $155 billion. Export growth has been impacted due to an over 11 per cent rise in value of rupee.
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