Page 45 - Chemexcil NEWS August - September 2017 for web
P. 45
23. GST OPENS A PANDORA’S BOX FOR EXPORTERS
The strong rupee and an ambiguous goods and services tax (GST) is giving sleepless nights to exporters
India’s export-to-GDP (gross domestic product) GST era, exporters enjoyed a slew of exemptions
ratio slid to a multi-quarter low in June. Con- under FTP. They could import capital goods and
cerned over this, the new commerce and industry raw materials without paying duties, thus having
minister Suresh Prabhu has assured that the gov- no impact on cash flow. However under GST,
ernment will try to revive exports at the earliest. exporters are exempt only from paying the basic
But that is a tough task in the current scenario. customs duty.
The strong rupee and an ambiguous goods and “Currently, the biggest concern among exporters
services tax (GST) is giving sleepless nights to is that FTP 2014-19 remains aligned to old taxes.
exporters. Claiming export benefit has always been a
documentation intensive process, hence clarity
Here’s why. under the GST regime at this stage would be very
beneficial. Since GST functions on the principle
Like small and medium enterprises, the working of refund and not exemptions, delays in the
capital needs of exporters too have increased. refund process severely strains working capital
Under GST, they first have to pay integrated management of exporters,” said M.S. Mani, senior
GST and seek a refund only after the goods are director (indirect tax) at Deloitte Haskins and Sells
exported. Smaller exporters are required to Llp.
furnish bonds and a letter of undertaking to the
local commissioner, which is a financial burden, In simple terms, there is a risk of working capital
especially for service exporters. remaining blocked for a couple of months. This
means loss of interest on this money, which an
Despite the new tax regime being in place for over exporter may have otherwise earned. At the
two months now, there is limited clarity on the country level, capital to the tune of Rs95,000
refund mechanism. This is making the situation crore is estimated to be locked-up from the time
worse. of buying raw materials and claiming refund on
exported goods, which is typically four-six months,
The foreign trade policy (FTP) lays down the according to Suresh Nandlal Rohira, partner at
framework to incentivize exporters. They are GrantThornton India Llp.
eligible to get rebates since the aim is only to
export the value of goods and not the tax paid on Amid this confusion, Parimal Shah, vice-president
inputs required to manufacture them. In the pre- at MK Jokai Agri Plantations Pvt. Ltd, is worried
that a longer wait to claim refund might prompt
tea exporters to hike prices, thus hurting
competitiveness. Mid-size tea producers and
exporter caters to markets including Russia, Saudi
Arabia, the European Union and the UK.
This is a valid concern because the tea plantation
industry is one of the key contributors to India’s
GDP and generates a lot of employment. “Clarity
is yet to emerge on who should one approach for
refunds—the centre or states. In the long term, we
see a net-net gain of 1-1.25% on balance sheets of
43 August-September-2017
