Kerala exporters’ fraternity is keeping their fingers crossed over the government notification to restart GST collection on international outbound freight from October 1. They pointed out that the situation comes at a time when the sector is recouping from the Covid-induced slowdown.
Dil Koshy, secretary, Agricultural Products & Processed Food Exporters Association told BusinessLine that the government decision has brought unwarranted burden on exporters’ business, especially when interest rates moved northwards with RBI’s repo rate hike that had led to increased interest rates on existing loans of exporters. With normalcy getting restored in many countries, many are in the process of reviving business with the starting of regular flights. However, the re-imposition of 18 per cent GST on air freight and 5 per cent on seaways will lead to a working capital shortage and cause a burden on the exporters, he said.
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According to him, the government will not be getting any monetary benefits out of GST collections, but can only hold the funds for some time before reimbursing them fully to exporters. Moreover, there will be an inordinate delay in getting refunds.
Kerala, before Covid, shipped around 200 tonnes of fresh fruits and vegetables from the four airports. The average GST rate for perishable commodities like fruits and vegetables was in the range of ₹60-65 per kg by air, he added.
Munshid Ali, secretary, Kerala Exporters Forum said the GST impact on ocean freight will hit agriculture exports, as air freights at a time will be much higher than the FOB value of exports. The overseas freight rates have gone up by 300-350 per cent from the pre-Covid level and after a few corrections, they are still 200-250 per cent more than at the 2019 level. Therefore, GST payments on such high freight rates will affect the liquidity of exporters, particularly when the bank interest rates have increased.
Considering India as a multi-market with a huge volume of cargo and good number of ports, CFS and ICD’s, he said Kerala Exporters Forum is battling for more competitive price mechanism for ocean freight.
The government should extend the GST exemption on export freight and take the initiative to constitute a regulatory authority so that exporters can continue with the status quo without the need for arranging further funds, he added.