Exporters may get an outright exemption from the integrated goods and
services tax (IGST) on imported inputs that currently don't face basic customs
duty to help assist the sector.
Also under consideration is a refund mechanism for taxes paid on local
inputs used by exporters. The exporters are already reeling under the impact of
rupee appreciation which had made their goods less competitive in the
A decision in the matter is expected to be taken by the GST Council, when
it meets on October 6.
Exporters had access to duty-free inputs under the previous tax regime.
Some of these inputs continue to be exempt from basic customs duty, but face
IGST. Industry wants at least these inputs exempted under the GST regime to
begin with. The industry says outright exemption would provide long-term
solution to its woes.
The biggest issue for exporters at present is liquidity crisis forcing them
to close down their industry. There is
issue of blocked refunds and payment of taxes has to be done upfront. Banks do
not provide loans for payment of taxes. Exemption will help provide a solution
on a long-term basis.
Expeditious refunds will help address the immediate problem of liquidity
according to spokesman of all the regions of Federation of Indian Export
Embedding of taxes makes Indian products uncompetitive as other nations do
not levy any tax on goods meant for export they said.
The problem has been compounded for exporters as there has been a delay in
the refund of taxes they paid on inputs, leading to working capital issues. If
the GST Council decides on such a framework for exporters, it will resolve the
issue of cash flows and bring them on par with their foreign counterparts.
Exporters are not taking fresh orders according to spokesman of the southern
region of FIEO. Many units have informed the employees of their decision to
fold up as liquidity crisis is mounting by the day.
The government is keen to address issues concerning exports expeditiously
since the sector contributes substantially to job creation, as it seeks to
revive growth that slumped to a three-year-low in the June quarter.
The issue is being looked at with a sense of urgency according to commerce
ministry sources. The government will ensure that the domestic industry isn't
put to any disadvantage on account of the strategy to help exporters. Finance
ministry officials have been holding intensive deliberations on the framework
of the scheme.
Officials of the finance and commerce ministry are holding extensive
discussions on providing substantial relief to the exporters.
Exporters, particularly the smaller ones, have begun to face working
capital issues with tax refunds getting stuck after the rollout of GST on July
1. They are also unable to price their products for advance Christmas orders as
there is no clarity on refunds. This trend would have broader ramifications for
the country's exports
The rupee's climb has eroded export competitiveness, with the currency
strengthening nearly five per cent against the dollar since the beginning of
the year. The rupee closed at 65.12
versus the dollar on September 25,
According to FIEO, the cumulative order book position is down 15-20 per
cent from the year earlier. India exported goods worth 274.6 billion US Dollars
in FY17, just 4.7 per cent higher than 262.2 billion US Dollars in FY16.
Exporters have claimed that refunds worth Rs 65,000 crore in the
July-October period are stuck. The government has disputed this figure.
The refund issue has cropped up largely due to the extension in the filing
date for returns following technical glitches in the GST Network.
The GST Council at its last meeting
had set up a committee headed by revenue secretary Hasmukh Adhia to look into
the issues faced by exporters and draw up a plan for their resolution. The
panel held detailed discussions with exporters and is now working on a
framework to resolve them.