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Parliamentarians to press for fresh concession to small scale exporters

 Parliamentarians have favoured fresh concessions to labour-intensive exporting sectors such as textiles, leather, gems and jewellery to mitigate the compliance burden incurred in transitioning to the goods and services tax (GST) regime that was rolled out on 1 July.

A parliamentary panel which went into the problems of the small scale industry that contributes nearly fifty per cent of the country's exports has asked the finance ministry to allow exporters to use the old system of refunds through the so-called duty drawback scheme.

The Parliamentary Standing Committee on Commerce sought the intervention, claiming that the GST compliance burden was causing job losses in labour-intensive export sectors. They are also suffering from working capital problems due to delays in securing refunds from the government under the GST regime.

Under the duty drawback scheme in the pre-GST era, exporters could claim rebates on taxes such as service tax and excise duty. After GST was introduced, the government pared the duty drawback rates as exporters were supposed to claim refunds after paying taxes.

Sources in the committee are of the view that the small scale exporters who are labour intensive don’t want to get into the process of first paying duties and then seeking GST refunds. The committee is likely to take up the issue and make suitable recommendations.

Any decision to amend the rules will have to be cleared by the GST Council—the apex federal body made up of state finance ministers and headed by Union finance minister Arun Jaitley.

The finance ministry officials are understood to have assured the standing committee that they will take up the issue with the GST Council, the source said. The report is likely to be presented to Parliament during the winter session beginning 15 December.

India’s merchandise exports declined for the first time in 14 months in October as exporters struggled with a liquidity crunch because of delayed refunds under the GST regime. Shipments of ready-made garments declined by nearly forty per cent and gems and jewellery by nearly twenty five per cent.

If the situation continues, the apparel export industry may suffer massive job losses according to a spokesman of the apparel export association.


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