Even as the pharma exporters in the country have been demanding to the Union commerce ministry to initiate measures to reduce transaction costs in exports, the ministry has constituted yet another task force on transaction costs primarily to identify reasons for high transaction costs in exports.

Earlier in 2011, the union commerce ministry had constituted a task force under the then minister of state for commerce Jyotiraditya Scindia on the issue of reduction of transaction costs in exports. But, the ministry did not so far implement the issues identified by the task force. Instead, it has constituted another task force.

Constituted under the chairmanship of Director General of Foreign Trade (DGFT), the task force, apart from identifying reasons for high transaction costs in exports, will also identify areas, where Indian exporters face administrative impediments that lead to increase in transaction cost. It will also compare procedural complexities in exports between India and its major competitors.

Besides, the DGFT-headed task force will suggest guidelines and steps for removal of procedural complexities drawing from the global best practices. It will also suggest guidelines and steps to move towards transparent and increasingly paperless processing through digital platform.

For quite some time, the exporters in the country have been demanding to the government to bring parity in the excise duty rates for inputs and finished formulations for pharma products to reduce transaction costs in exports. Exporters rue that in the pharmaceutical industry, finished formulations attract 6 per cent excise duty, whereas inputs attract 12 per cent excise duty.  This has resulted in huge accumulation of CENVAT credit. There is delay in refund of CENVAT credit leading to accumulation of CENVAT credit due to anomaly in the rates of excise duty on the inputs and outputs in pharma industry. This blockage of working capital has resulted in significantly high interest cost, leading to uncompetitive exports, they regretted.

Besides, the exporters have also been demanding to the ministry to keep activities of foreign office of Indian firms out of the purview of service tax to reduce transaction costs of the exporters. Exporters stressed that the activities carried out by the foreign offices of the Indian parent companies are not services in true sense of the term. In fact, the setting up of the foreign office is a need, if not compulsion, to increase the exports. These offices are essentially not revenue generating and therefore Indian parent companies have to necessarily fund their activities, they pleaded.

Meanwhile, the Pharmaceuticals Export Promotion Council of India (Pharmexcil) has asked its members to send their suggestions to reduce transaction costs or to remove complexities to enable the Council to compile the same and submit to the task force for its consideration.