“Exporters are not used to paying any taxes. The implementation of GST, which is good for trade and industry, would, however, block the working capital of exporters,” Ganesh Kumar Gupta, president of Fieo, told The Telegraph.
“If taxes are to be refunded, it would be better to continue with the existing system of exemption … locking of working capital is not a good move.”
“The basic issue is providing liquidity for the exporter or for the state. The exporters have to borrow at a market rate of 14 per cent, whereas states can borrow at 6 per cent,” Gupta said.
According to estimates, working capital of Rs 1.85 lakh crore working capital will get stuck annually with the government under goods and services tax (GST). This would push up the manufacturing cost of the exporters as they have to borrow more from banks.
Early refund
“GST clearly provides that taxes must be paid and that refund will be provided. So since the regime is so structured, the department of revenue has committed that 90 per cent of the refund will be made within seven days. Delays beyond that would invite interest payment,” commerce minister Nirmala Sitharaman has said.
She said exporters would be paid interest if the refund got delayed beyond two weeks. However, the interest rate has not been specified. For the remaining 10 per cent, the minister said it would be subject to whatever verification the revenue department is required to do.
Gupta said: “Fieo has taken up this issue with the working group set up by the government on GST.”
Rules for SEZ
Gupta said there was no clarity on whether I-GST (integrated GST) was to be payable in special economic zones.
“If I-GST is not payable in the tax-free zones, then the SEZ Act needs to be amended. Since SEZs are custom-bound areas there is a case for providing exemption from I-GST. This would provide an advantage to these zones and boost exports.”
In the current regime, SEZ developers and units import their requirements without any duty or tax. In addition, all the supplies from the domestic suppliers to SEZ developers are exempt from any tax or duty as they are considered exports.
Officials, however, said in the GST regime, SEZs will be technically considered within the domestic border of the country and render them equivalent to other domestic firms and are likely to attract the different tax components of the GST – CGST, SGST or I-GST. So, they would have to claim refunds of any unutilised input tax credits in GST.
Strong rupee
Expressing concern over the appreciation of the rupee against the dollar, Gupta said certain incentives in the form of interest subvention being offered to manufacturers may be extended to merchants and other exporters.
He said the Merchandise Exports from India Scheme (MEIS) across sectors can somewhat offset losses on account of the rupee appreciation. Gupta said he would be meeting the commerce minister and finance minister to discuss this issue.
Source : The Telegraph