A government panel headed by the Revenue Secretary will meet on September 19 to resolve a ‘$10 billion-problem’ troubling India’s exporters and its potential adverse impact on jobs.
Official sources told The Hindu that the Revenue Secretary-led ‘Committee on Exports’ — set up on September 12 to address exporters’ concerns over the Goods and Services Tax (GST) regime — would, among other things, take up the issue of “inordinate delay in refund of GST to exporters” and the consequent blockage of working capital that is severely affecting exporters’ liquidity and enhancing their tax burden.
Tax credit refund
According to Ajay Sahai, director general and CEO, Federation of Indian Export Organisations (FIEO), “Exporters were expecting that the Integrated GST (IGST) refund or refund of input tax credit (ITC) would be available to them in August, 2017 for the exports made during July.” He added, “However, since the filing of (GST returns) GSTR-1,2 and 3 for July has been extended till October 10, October 31 and November 10, respectively, exporters will not be able to get the refund by November.”
Mr. Sahai said since exporters would have to wait till around December (considering 15 days for issuance of acknowledgement and another seven days for getting provisional refund of 90% of the total refund claim) for availing refund of the GST on exports, it would mean that they would have to arrange funds from their own sources to pay GST for the July-October period. The blocked amount for the four months time is estimated to be about $10 billion, Mr. Sahai pointed out, adding that the situation could lead to huge job losses.
(The calculation is as follows: India’s goods and services exports are worth $450 billion. Of this, exports from SEZs worth $75 billion can be excluded as they are exempted from IGST/ITC. The remaining are $375 billion-worth annual exports, meaning exports for four months are $125 billion. An average GST rate at 10% on this would be $12.5 billion. After deducting $2.5 billion — owing to no GST claim on those exports claiming higher duty drawback — the blocked amount is estimated to be $10 billion).
In a representation submitted to the government, FIEO, which is the apex body for exporters in India, suggested that IGST and ITC refund should be given on the basis of the GSTR-3B and GSTR-1 filed by the exporter. “The government should trust the trade and wherever necessary an undertaking maybe obtained for the exporter for recovery of excess/ undue refund, if any,” FIEO said in a representation.
The other issue that will be considered by the committee is the demand that exporters be given an outright exemption from GST, or the creation of e-wallet as an alternative. The FIEO has also recommended that Merchandise Exports from India Scheme (MEIS) / Service Exports from India Scheme (SEIS) Duty Credit Scrips should be allowed for the payment of IGST and at least of Central GST. Utilisation of the Scrips may also be considered for payment of Bank interest, it added.