Indian Exporters Express Anger Over Profit Tax Hike

by Lorys Charalambous, Tax-News.com, Cyprus

17 March 2003

Anger has been expressed by a body representing Indian exporters over Finance Minister Jaswant Singh's recent decision to hike export profit tax from 50% to 70%.

The Federation of Indian Export Organisations, (FIEO) has said that the tax should be pegged back to 50%, and frozen there until India accounts for 1% of global trade. The FIEO's vice-president, Subhash Mittal regards the tax as potentially damaging to India's exporting industry, and has urged the government to rethink its proposal. "Exporters were pleading in the past about the service tax imposed on services availed by exporters... in today's time of highly competitive prices, the exporters are really not in a position to bear any additional expenses" he argued, according to a Hindu Times report.

Expressing his concern about the effect of the rise in service tax from 5% to 8%, Mittal said that Indian businesses faced a double whammy of tax increases, which will add significantly to firms' costs. According to Mittal, these additional expenses will account for 22% of a company's costs. With the planned introduction of VAT from the next fiscal year, this will rise to 30%.

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