In a bid to give a massive push to exports, government will phase out around 29 cesses, mostly levied on farm products, in the coming months as they affect competitiveness of Indian products abroad.

Definition of "manufacturing" while giving tax concessions will be uniform for all exports across the board.

"We have accepted in-principle that taxes and duties should not be exported. Taxes are levied through acts of Parliament, so rules and procedures will be followed to make the required changes," Director General of Foreign Trade G K Pillai said in New Delhi.

He said there were individual items for which the commerce ministry was "fighting" to ensure their exports are exempted from tax.

"The conclusion we have arrived at is that incidental levies have to be removed, transaction costs reduced and gradually cesses have to be done away with," he said.

Addressing an open house on foreign trade policy, organised by Chemexcil, he said these cesses included the one levied by the Agricultural and Processed Foods Export Development Authority.

Traders said it was anachronistic that cesses were still levied on export of commodities like tea, coffee, basmati, spices and menthol.

Pillai said the Foreign Trade Policy was nearly in full concurrence with the finance ministry and, therefore, tariff concessions declared therein will be implemented by the Department of Revenue.

Definition of "manufacturing" given in the FTP is common to all exports across the board and will be observed for taxation purposes by the finance ministry.

There may be difference in perception on 10 per cent of the issues with the finance ministry, which too will be cleared in the next few months, he said.

Traders pointed out that under Article 286 1-B of the Constitution, states have no right to tax import items.

Pillai, however, said there were practical difficulties in doing away with taxes on exports.

He said since a large part of exports were outside the domain of 100 per cent export-oriented units, each transaction or item has to be looked into.

"A company may export 30 per cent of its goods and the remaining 70 per cent of the sales will be in the domestic market. Then to identify the export transactions to provide tax exemptions will be difficult", he said.

Pillai said another issue being delved into was finding out ways and means of ensuring that exports are also exempted from taxes levied by the states.

He said these included the central sales tax and octroi and even after sales tax is replaced by value-added tax next year, the issue will remain.

"How do we reimburse VAT for export purposes is a crucial issue. It has not yet been decided, but is under discussion between the state finance ministers and the Union finance ministry," he said.

It should be noted that a company may buy services but not export its entire production.