| SAVING GRACE
New Delhi, Oct. 6: The government today widened the scope of service tax refunds for exporters and allowed them to earn interest on foreign currency accounts as part of measures to mitigate the impact of rupee appreciation.
Separately, Prime Minister Manmohan Singh has asked his economic advisory council chairman C. Rangarajan to spell out more ways to pull exporters out of the crisis spawned by the rising rupee.
The finance ministry, in a statement, said exporters would now be given a refund of taxes paid on seven services, including the three announced today — general insurance, technical testing and analysis, and inspection and certification.
In a related development, commerce and industry minister Kamal Nath said the Prime Minister had asked Rangarajan to suggest more steps to help exporters and submit a report on slowdown in industrial activity within a month.
Nath said while he was happy with the steps announced by the revenue department, his ministry would continue to press for more relief needed for “other employment generating sectors”.
The sectors which do not have import content for exports such as minor forest produce and food processing feel the maximum impact of the rupee appreciating to a nine-year high.
Last month, the government had exempted services rendered by ports, road transport and railways from the purview of tax.
The government has allowed payment of interest on a maximum amount of $1 million kept in foreign currency accounts. The rate of interest, however, will be decided by banks and will be valid up to October 31, 2008.
Such steps will provide some relief to exporters hit by the rising rupee. The currency hit 39.36 per dollar on Thursday, its strongest since March 1998, and has gained 1 per cent this week. It is up more than 2.5 per cent since the US Federal Reserve cut rates last month and has risen 12 per cent in 2007.
The list of sectors eligible for a reduced interest of 4.5 per cent minus the benchmark prime lending rate on pre and post-shipment credit has also been expanded to 12.
Sectors such as textiles with handloom, jute and carpet, readymade garments, leather products, handicrafts, engineering products, processed agricultural products, marine products, sports goods and toys are included in the list.