Exporters stand to lose exemptions as GST rolls in

Amiti Sen New Delhi | Updated on January 27, 2018


Existing schemes to be changed; mid-term review of foreign trade policy delayed

Exporters are set to face a more taxing time from July 1 as the government is planning to come up with notifications aligning existing incentive schemes with the GST regime, which will require them to cough up more levies.

“Exemptions from import taxes on inputs under all popular schemes such as Advance Authorisation and Export Promotion Capital Goods will be heavily curtailed as exporters will now be required to make payment for IGST (integrated GST) and spared only basic Customs duty,” a government official told BusinessLine.

To make matters worse, new incentives and schemes, especially for the small-scale and labour-intensive sectors, which were to be a part of the foreign trade policy review and announced in parallel, will be ready only in September, according to a statement from the Commerce Ministry.

“During one of the stakeholder consultations, it was announced that an effort will be made to release the mid-term review before July 1, 2017, to align this with the rollout of GST. A number of representations have been received from the exporters regarding GST. Accordingly, it has been decided to release the reviewed Foreign Trade Policy in September 2017,” the release issued on Thursday stated.

Since it is not possible to continue with the existing schemes in the original form with the introduction of GST on July 1, the government has to bring about the necessary changes in them through specific notifications.

Discussions on

“The Commerce Ministry tried to convince the GST council to provide exemption from IGST under the export incentive schemes but failed,” the official said. “Other ways of helping exporters by including GST payment in the duty drawback scheme are under discussion. But, right now, there is no option other than making exporters pay and then apply for a refund.”

Under the current dispensation, exporters are exempted from paying the basic customs duty, the CVD as well as the special additional duty on imports of inputs under various schemes. When GST comes into play, exporters will have to pay IGST (which will replace CVD and SAD) and will get it only as a refund with a time lag.

Even popular schemes such as the Merchandise Exports from India Scheme and the Services Exports from India Scheme, which, at present, provide duty-free scrips used to pay for a wide variety of duties on inputs, including customs duty, excise duty and service tax, may be hit.

Exporters complain that not getting an exemption on GST would lead to blocking of working capital and may create problems, especially from micro, small and medium enterprises.

According to estimates by exporters’ body FIEO, the export sector will be losing competitiveness by 2 per cent and the same needs to be compensated.

“Various options for helping exporters deal with the situation — like making payments through e-currency or getting exemptions — are still being discussed, but would need more time to be agreed upon. Hopefully, the mid-term review of the foreign trade policy would address problems faced by exporters under the GST regime,” the official added.

Published on June 29, 2017

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