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Despite the government’s assurance that refund of Goods and Services Tax (GST) to exporters will happen smoothly and on time, exporters are apprehensive that their liquidity will get hit and costs would go up once the regime is in place in three months time.
The main problem stems from the fact that there is no exemption under GST for exporters or a clear cut time-line on its refund.
“We know how long it takes to get refunds, especially from State governments. The Value Added Tax paid by exporters in Delhi was stuck for the last six-seven years. There is no reason for us to expect things to change under GST,” said Tilakraj Manaktala, an exporter of home furnishings and a member of the Delhi Exporters Association.
Smooth flow of goods The GST regime, that promises to smoothen flow of goods and services across the country by replacing multiple indirect taxes with a single tax (five slabs including zero duty) at the Central (Central GST), State (State GST) and inter-State (integrated GST) levels, is likely to be implemented from July 1.
Manaktala said that since many input taxes will get subsumed in GST, the duty drawback that exporters claim in lieu of input taxes paid on exported goods will shrink. Once GST is in place, the drawback rate will include just the basic customs duty and the Central GST portion of the total GST. “The drawback money is an assured source of duty refund for exporters. This unfortunately will reduce while there is no certainty on when and how much will get refunded under GST,” Manaktala said, adding that the DEA has been pushing the government for exemption.
While at present exporters are exempt from payment of additional customs duty and excise on imports of inputs used in exports, both will get subsumed in GST and will be no longer eligible for exemption. “As per a study that we had done, costs for exporters could go up by up to 1.25 per cent (FOB value) once the GST is implemented,” said Ajay Sahai from the Federation of Indian Export Organisations.
While the Centre has promised that 90 per cent of the GST value will be refunded to exporters within a specified time-frame from the date of completion of application, there is no clarity on what ‘date of completion’ is, Sahai added.
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