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Traders say delay of billions in tax refunds slows India exports

Traders are having a very tough time even after 4 months post-GST, they have not seen refunds to the tune of 500 billion. They have lost their revenues and much more than that they have to let their workers go, a very serious situation in any trade. As the regional chairman of FIEO has rightly said, “It is an alarming situation”. More than 10,000 workers have lost their jobs in the Tirupur export hub that employs half a million in the state of Tamil Nadu, according to him.

India’s exports, for the first time in 15 months, declined in October falling 1.1 percent to $23.1 billion despite the government’s attempts to simplify GST. Last month’s trade deficit widened the most in three years to 14 billion; and exports are expected to fall further in November if prices of crude oil, India’s biggest import, continue to rise, traders say.

With elections being just round the corner in key states including PM Modi’s home state, it is in the least favourable situation for the government facing tough challenges of restoring business and saving informal sector jobs.

Small, unorganized businesses -- especially in traditionally dominant textiles and jewelry sectors -- have witnessed the worst supply chain disruptions since July, exporters say. Two-thirds of India’s exports basket comprises traditional product groups, including gems and jewelry, pharmaceuticals, textiles, engineering goods, food and fuel. In spite of extended deadlines for tax filing and large-scale reviews that eased rates for merchant exporters, the flow of cash refunds remains slow, according to traders.

Although exports are likely to stabilize after the GST-driven distortions subside, the traditional product mix will hinder the country’s ability to participate in the ongoing trade upturn, according to Radhika Rao, Singapore-based economist at DBS Bank.

The government’s efforts to address exporters’ concerns will begin to show results shortly, according to Ajay Sahai, director general of the Federation of Indian Export Organisations. But in the meantime, many of the smaller exporters had to stop accepting fresh orders for lack of funds after paying taxes, he said.

The liquidity crunch has worsened with banks unwilling to lend exporters for GST payouts while they wait for refunds. Having to borrow more was further hurting profitability, said Ganesh Kumar Gupta, Mumbai-based chairman of Akaash Textiles Pvt. Ltd. and Vijay Silk House Group.

"GST will help the whole nation but the system is just not working,” Gupta said. "We’d rather the government kept exporters out of the GST completely."

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