India withdraws tax refunds incentive on steel, cement

March 28th, 2008 - 6:59 pm ICT by admin  

New Delhi, March 28 (IANS) The government has withdrawn its tax refund incentive on some 50 items, including steel, cement and non-basmati rice, to curb inflation, a top commerce ministry official said Friday. This move comes a day after the ministries of finance, commerce and industry and agriculture decided to stop refunding the taxes under the duty entitlement pass book (DEPB) scheme - a popular export incentive given by the government.

“When there is a shortage in the country and prices are high, why give export incentives?” Commerce Secretary G.K. Pillai queried while speaking to reporters on the margins of an event at the Federation of Indian Chambers of Commerce and Industry (Ficci).

“The total number of items on which the DEPB benefits have been withdrawn would be running into about 40-50,” he said, adding that this was extremely crucial in the wake of the inflation breaching the six-percent mark.

The DEPB Scheme, which is about to expire by the end of current fiscal, had come under severe criticism from the World Trade Organisation (WTO), which feels it is a subsidy given by the government.

To counter this, the government had been seeking an alternative methodology to help the exporters some of whose margins have been eroded due to an appreciating rupee against the dollar.

With less than a month to go for the annual review of the Foreign Trade Policy, the government is awaiting the report of a working committee that is looking at alternatives to the DEPB scheme.

Pillai also said that an empowered group of ministers (EGoM) would meet April 2 to ensure steady supply of food items in the backdrop of soaring inflation, especially the prices of rice, wheat and procurement of edible oil.

Inflation reached a 13-month high of 6.68 percent for the week ending March 15, against the central bank’s target of five percent.

The inflation rate, based on the wholesale price index, had soared to a 12-month high of 5.92 percent in the week ending March 8 against 5.11 percent in the preceding week.

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