RTTNews - India's Commerce Ministry, to help exporters being hit by the ongoing global economic crisis, proposed to the Finance Ministry to exempt income tax three years to certain labour- incentive sectors like handicrafts, leather and textiles, reports Business Standard (Income tax exemption for exporters under section 80 HHC of the Income Tax Act was withdrawn in 2005).

A government official said the exports, particularly from labour-incentive sectors, were severely hit due to decline in overseas orders. Analysts feel the exemption could benefit traders who make 10% profit with about 3.5% that is spent on freight on-board value of the total exports. They also say that the proposal will increase the competitiveness of exports.

Implementation of such a proposal could have impact at the international level as exemption of direct tax is seen as subsidy. Therefore, members of World Trade Organisation (WTO)could impose offsetting measures on Indian exports, which may nullify the benefits of the exemption. However, industry lobby groups like the Federation of Indian Export Organisations (FIEO) are demanding exemption from income tax to boost competitiveness.

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