NEW DELHI: The Government may offer incentives to exporters to offset potential losses after goods and services tax (GST) kicks in from July, which will do away with a string of exemptions that traders currently enjoy.
“The Directorate General of Foreign Trade (DGFT) is considering allocation of resources or ways to incentivise exporters (after implementation of GST from July 1) in some manner,” a Senior Government official said recently.
Exporters had sought DGFT’s intervention as they fear that the proposed policy for tax refunds after GST’s rollout will increase their capital cost, locking up large amounts of funds till actual trade takes place.
Under the advance authorization scheme of the Foreign Trade Policy (2015-20), exporters get duty free import of inputs required for export production.
With the implementation of GST, these exemptions would cease to exist and the exporters will have to pay Integrated GST (IGST) at the time of importing raw material and intermediate products.
According to the GST Council’s proposal, exporters would get 90 percent of the tax refund within six to ten days. In addition, an interest of about 6 percent will be given to the exporters for any delay by the Government.
The remaining 10 percent of the refund will be paid after the revenue department completes the scrutiny of exports.
Earlier this month, a team of Commerce Ministry officials including the Commerce Secretary Rita Teotia had taken up this matter with revenue department. The department, however, is not in favour of any exemptions once GST is rolled out, the official said.
Exporters have been demanding exemption from payment of taxes under the GST as processing of refunds generally takes few months, which will eventually block their working capital.
The revenue department also did not approve DGFT’s proposal to create an e-wallet facility for virtual payment of taxes, under which a firm can pay taxes after a year or at a time when goods are exported, or whichever is earlier.
The official further said that DGFT now has to carefully look at certain aspects before finalising the incentives for exporters, especially the small and medium enterprises.
“We will have to see which exporter has a longer manufacturing cycle, or who is using more money. In many cases, raw material could be procured locally. We will have to see which categories of exporters are compulsorily importing raw material for exports, which is not available in India and offer incentives accordingly,” the official said.