NO.CLE/ED/BUDGET /2009
July 6, 2009
All Members of the Council.

Sub : Union Budget 2009-10

Dear Member

As you are kindly aware, the Hon’ble Union Minister of Finance announced the Union Budget 2009-10 today.  
As far as the leather sector is concerned, the following major benefits have been announced in the Union Budget 2009-10 

1)   Inclusion of new inputs for manufacturer exporters of leather garments, footwear (including non-leather footwear) and other leather products under the 3% Duty Free Import Scheme (DFIS). Though the Council had submitted exhaustive list of inputs for inclusion and also sought amendments in existing descriptions of inputs, only certain items have been included.

2)   Amendments have been made in the list of machinery notified under list 34 of serial no. 257 of Customs Notification No. 21/2002 dated 1.3.2002, as amended from time to time, which allows import under 5% concessional duty (basic customs duty). These amendments were earlier sought by the Council so as to avoid customs interpretation problems. 

3)   The 2% interest subvention scheme for certain labour intensive sectors including the leather sector has been extended from Sept. 30,2009 to March 31, 2010. This will facilitate reduced interest rates @ BPLR minus 4.5% for the leather sector on pre-shipment and post-shipment rupee export credit. The RBI is expected to issue the notification in this regard in due course.

4)   Additional Benefits (coverage) under Export Credit Guarantee scheme have been extended till March 2010. As per current package of ECGC, the percentage of cover is enhanced by 5% under Export Credit Insurance Policies issued to exporters and by 10% under Export Credit Insurance Covers for Banks. Thus, the total coverage for the exporters will be  95% and for the banks to 85%. 

5)   The Excise Duty Exemption is being extended to Ethylene Vinyl Acetate (EVA) compound manufactured by a job worker, for further use in the manufacture of footwear, on par with PVC Compound.

6)   Exemption of Service Tax on foreign agents commission and transport of goods through road. In respect of foreign agents commission, the exemption would be  to the extent of service tax on commission upto 10% of FOB value of exports i.e 1% of Service Tax +applicable cess. Thus there would be no need for the exporter to first pay the tax and later claim refund in respect of these services.  

7)   The refund of Service Tax for other services have also been notified, by replacing the refund scheme notified earlier vide Service Tax Notification No.41/2007 dated 6.10.2007 .  

8)   Fringe Benefit Tax on the value of certain fringe benefits provided by employers to their employees has been abolished. The Council had included this request in its pre-budget proposals. 

9)   To facilitate flow of credit at reasonable rates, Rs.4,000 crore provided as special fund out of Rural Infrastructure Development Fund (RIDF) to Small Industries Development Bank of India (SIDBI). This will incentivise Banks and State Finance Corporations (SFCs) to lend to Micro and Small Enterprises (MSEs) by refinancing 50 per cent of incremental lending to MSEs during the current financial year.

The highlights of the Union Budget 2009-10 are given in the enclosed note. The detailed notifications are hosted in the website www.finmin.nic.in, which members may refer. In the case of any clarification, you may approach the Head Office or Regional Offices of the Council.

With regards

 

ALI AHMED KHAN
EXECUTIVE DIRECTOR
COUNCIL FOR LEATHER EXPORTS