No extension of the Sunset Clause for Export Oriented Units, or EOUs, nor will there be an exemption from the fringe benefit tax, or FBT, for SEZs. This is the response from the Finance Ministry to the Commerce Ministry's demands, reports CNBC-TV18.

As the Budget day approaches, the slugfest over exemptions begins. But with the PM calling for a cut in exemptions, there is bound to be dissapointment.

CNBC-TV18 learns that the Commerce Ministry is pushing for an extension of the Sunset Clause for EOUs beyond 2009-10. It believes that EOUs have a continuing obligation to exports and a withdrawal of incentives under section 10A, 10B will erode their profitability and discourage fresh investments. However, the Finance Ministry is belived to have turned down this demand.

The Commerce Ministry has also made a case to exempt EOUs and SEZs from the controversial Fringe Benefit Tax. But the Finance Ministry says FBT is levied on employees and not employers and so there is no reason to favour employees in a particular sector.

From one controversial tax to another. The Commerce Ministry is pushing for the withdrawal of the Banking Cash Transaction Tax for exporters. They say this leads to double taxation and makes the tax structure more complicated. The Fin Min says the the BCCT is very low, Rs 100 on withdrawal of 1,00,000 and will not affect exporters.

The Commerce Ministry also wants the special CV duty on imports to be reduced to 2% from 4%. They say imposition of this duty last year has raised total import duty from 34.44% to 36.74%. But the Finance Ministry says peak rates of import duty were lowered to 12.5% in the budget last year and so this special CV duty protects domestic industry.

With more than a month to go for the budget, the Commerce Ministry will have to use its powers of persuasion to get the Finance Ministry to budge.