New Delhi: In a move to support exporters recovering from a prolonged contraction, the GST Council headed by finance minister Arun Jaitley is set to consider new measures for a quick refund of taxes paid by them.
Measures for the swift processing of refund claims, which will be taken up at a meeting of the council on Friday, will improve the liquidity of exporters.
An official privy to the discussions in the council said on condition of anonymity that the indirect tax body will consider the report of a panel led by revenue secretary Hasmukh Adhia which examined ways to avoid blocking exporters’ funds. The panel set up by the council had sought exporters’ views in August.
Exporters are likely to be allowed refunds without waiting for the invoice details of raw materials and other purchases, but based on the summary of all transactions and details of exports made.
Exporters have made a series of demands including exemption of imported raw materials from GST rather than having to pay tax first and claiming a refund later. They say they are losing their competitive edge and are facing a liquidity crunch due to delays in GST refunds and upfront payment of GST on inputs for exports.
Exports constitute around 20% of India’s gross domestic product (GDP and a decline in overseas shipments could aggravate a slowdown in the economy, which grew 5.7% in the June quarter, the slowest pace in three years. All taxes that go into exported products are refunded by the government to make these products competitive in global markets.
The countervailing duty (CVD), and special additional duty (SAD) levied on imports under the earlier tax system have now been replaced by integrated GST (IGST) on imports. While exporters earlier used to get advance authorization and did not have to pay taxes for import of inputs for export purposes, now they pay IGST, which locks up their working capital due to absence of a quick refund mechanism. Extension of the last day for filing GST also delays refunds to exporters.
“Steps that will quicken the processing of refunds without actually compromising the basic design of GST would be easier to implement," said Abhishek Jain, partner, indirect taxes, EY.
The problems faced by exporters under GST regime had been expected, international trade expert T.N.C. Rajagopalan said.
“The GST Council needs to streamline the refund mechanism especially for the merchant exporters, advance license holders and export-oriented units at the earliest," Rajagopalan said.
The Federation of Indian Export Organisations (FIEO) said in a representation before finance minister Jaitley last week that most exporters didn’t have the financial wherewithal to pay GST liabilities for three months without being refunded.
Exporters may be provided GST refund based on GSTR-1 (the return relating to supplies) and GSTR-3B (a summary of transactions) so that the cash flow to export sector is maintained, FIEO said.
The lobby group also urged the finance ministry to introduce an e-wallet for exporters in which based on the preceding year’s exports and an average GST rate, e-currency is credited to exporters’ account. “Like a running account, money may be debited from the e-wallet when duty-paid supplies have to be undertaken and the amount may be credited when the proof of exports is made available," FIEO said.