“The government has decided to enhance rates of tax refunds through Duty Drawback Scheme on nearly all products with effect from April 1 this year,” Finance Secretary D Subbarao said here announcing the package.
“This will cost Rs 800 crore to the exchequer,” he said. Impact of tax paid on services used as inputs in the manufacturing or processing of exports has been factored in duty drawback rates, he added.
Package for SMEs
The government would introduce a separate package for all (SMEs) small scale enterprises engaged in export activities as well as in nine selected sectors with a revenue implication of Rs 600 crore, he pointed out.
It relates to concessional pre-shipment and post-shipment credit by banks for SMEs and nine specific sectors that include textiles, ready-made garments, leather products, handicrafts, engineering products, processed farm products, marine products, sports goods and toys. The banks would charge interest rate not exceeding Benchmark Prime Lending Rate (BPLR) minus 4.5 per cent on pre-shipment credit up to 180 days and post-shipment credit up to 90 days on the outstanding amount till December, Financial Sector Secretary Vinod Rai said. At present, banks are charging interest rates not exceeding BPLR minus 2.5 per cent on these two kinds of credit, he observed.
To compensate banks for providing such concessional credit the government would provide two per cent subvention to banks through the Reserve Bank of India, Mr Rai said.