With about 18 per cent growth during the first three quarters of 2011-12, aircraft exports including component parts stood at about 1.31 billion dollars against 1.11 billion dollars in the corresponding period of previous fiscal, according to The Associated Chambers of Commerce and Industry of India (ASSOCHAM).
Parts and components have contributed a whopping 96 per cent of the total aerospace exports, highlighting India’s manufacturing capability in aerospace sector oriented towards tier I, II and III suppliers as against aircraft Original Equipment Manufacturers (OEMs).
In the interest of top level private defence equipment manufacturers and exporters, ASSOCHAM has sought an exemption from input tax and levies for their contractors and sub-contractors by issue of customs and excise duty exemption certificates on the lines of Defence Public Sector Undertakings (DPSUs).
“Issuance of customs and excise duty exemption certificates to DPSUs to claim exemption from input tax and levies is making the exports by private sector exporters uncompetitive by about eight per cent,” said ASSOCHAM.
Special Chemicals, Organisms, Materials, Equipment and Technologies (SCOMET) chapter 5 and 6 must be populated, while, India Harmonised Code System (ITC-HS) description of Defence and Aerospace is inadequate, said ASSOCHAM.
There is also a need to link SCOMET codes to the items listed in the Defence Procurement Procedure (DPP) export of which is considered to be offsetable. List of countries to which A&D trade is not encouraged be made available to industry on request.
Besides, there is a lack of proper definition for a defence product which is imperative for Aerospace and Defence (A&D) sector to be able to access policy support and incentives for exports. In the absence of list for identification of defence products, the government support remains adhoc, lengthy and unnecessarily litigative.
A long and delayed clearance process of about three months for genuince exports of defence products to qualified countries from India is a pain for majority of A&D exporters.
Sops like incentives and benefits on taxation dues and levies to A&D sector has been limited and skewed against private players. Besides, the government outlook on structural and taxation benefits to dedicated aerospace and defence manufacturing hubs also remains non-commital, said the chamber.
According to ASSOCHAM, the current rate of indirect taxes on Maintenance, Repair and Operations (MRO) activities are quite high making them uncompetitive as customs duty is exempt on parts imported for MRO of aircraft subject to specified conditions which if not satisfied would impose customs duty in the range of 19 per cent to 27 per cent on the imported parts.
First time exports must be provided with incremental offset multipliers and impact of duties and indirect taxes must be reduced for the export oriented production by the private sector.
ASSOCHAM has also suggested the government to introduce defence as priority sector for export promotion councils like Engineering Export Promotion Council (EEPC India).
A Defence Export Award must also be set up to acknowledge significant exports and must be categorised in the National Export Awards.
Source : indiablooms.com