To give a fillip to the country’s exports which have been falling for the last five months, exporters have sought an export development fund with an annual corpus of half a percentage of annual exports and a double tax deduction scheme to help the micro, small and medium sectors (MSMEs) to effectively reach out to foreign buyers.
In its Budget wish-list, exporters’ body FIEO has also sought reduced income tax for non-corporate bodies in order to bring them on par with corporate bodies.
“The industry has welcomed reduction in corporate tax to 15 per cent for new investors and 25 per cent to existing investors. However, this has created widespread disparity with non-corporate MSMEs which are subject to higher taxation of 35 per cent,” the representation said, adding that non-corporate bodies should also be made to pay lower tax. On the need for an export development fund, FIEO pointed out that the current marketing support under Market Access Initiative (MAI) of the Ministry of Commerce was very small and could cover at most 5,000 MSMEs out of over 1.2 lakh active MSMEs in exports. “We should create an Export Development Fund with a corpus of 0.5 per cent of the country’s exports for helping the MSME exporters,” it said. This would work out to a corpus of a little over $1.5 billion if annual exports are in the range of $320-350 billion.
To help MSME exporters meet the challenge of overseas marketing, FIEO suggested that the government must extend a ‘double tax deduction scheme’ for internationalisation of MSMEs to allow units to deduct against their taxable income, twice the qualifying expenses incurred for approved overseas activities including market preparation, market exploration, market promotion and market presence. “A ceiling of $2,00,000 may be put under the scheme so that the investment and tax deduction are limited,” it added.