Aerospace and defence exports are likely to clock $2 billion in the current fiscal, industry body Assocham said today.
With about 18 per cent growth during the first three quarters of 2011-12, aircraft exports including component parts stood at about $1.31 b ($1.11 billion). Parts and components have contributed a whopping 96 per cent of the total aerospace exports.
This highlights India's manufacturing capability in aerospace sector oriented towards tier I, II and III suppliers as against aircraft Original Equipment Manufacturers (OEMs).
However, in the interest of top level private defence equipment manufacturers and exporters, the trade body 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, it said.
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 ‘offset able'.
The list of countries to which aerospace and defence trade is not encouraged should be made available to industry on request, the trade body suggested.
Besides, there is a lack of proper definition for a defence product which is imperative for this sector to be able to access policy support and incentives for exports. In the absence of list for identification of defence products, Government support remains adhoc, lengthy and unnecessarily litigative, it observed.
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.