There is finally some respite for lakhs of exporters who have been complaining about goods and services tax (GST) eating into their margins and impacting shipments already grappling with poor infrastructure and an appreciating rupee.
With a committee of the officers, headed by revenue secretary Hasmukh Adhia, formed to identify embedded taxes in exports and look at ways to exclude or refund them, the commerce department seems to have at least convinced the GST Council to address the concerns. While Nirmala Sitharaman had flagged the concerns in June itself, it is only now that the issues has been noted. Soon after taking charge, commerce & industry minister Suresh Prabhu too had flagged the GST-related concerns as a priority.
Exporters are already ready with their long list of complaints, with the biggest worry being the higher interest burden due to the new system where taxes have to be paid instead of being waived. This is estimated to result in over Rs 1.5 lakh crore getting stuck with the government, which will be refunded later. While the revenue department had suggested a formula, requiring a budget allocation for the amount, it was rejected by the commerce department.
In addition, export-oriented units and those covered by advance authorisation schemes now have to pay integrated GST on imported inputs but can take input tax credit (ITC) only after sale to the domestic tariff area or export, claim refund of any of the unutilized credit.
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SEE ALL COMMENTSADD COMMENT Merchant exporters too are complaining as purchases from manufacturers are treated as domestic sales under the GST regime on which the applicable levy has to be paid. This eats into their thin margin, estimated at 3-5%, as the revenue department has rejected their demand to continue with the earlier bond-based mechanism, used at the time of sale to merchant exporters.
Sources said that the GST Concil has partly addressed the concern related to Exim Scrips, earned for exports undertaken through government schemes. These scrips were earlier used to pay customs, excise and service tax but their utility is now limited to the payment of basic customs duty, resulting in a massive erosion in the value of the instrument that can be traded.