NEW DELHI: Exporters have petitioned the Government for an outright exemption on payment of goods and services tax, saying that the time it takes to get reimbursements under the current mechanism was causing a working capital crunch.
According to industry claims, about Rs 1.85 lakh crore of working capital will get stuck annually due to the implementation GST. Several exporters said they are already facing a capital shortage and have begun to turn away orders.
Prior to the implementation of GST on July 1, exporters were exempted from paying duties. Now, they have to pay the tax first and then seek a refund, a process that ties up a portion of their working capital and pushes up manufacturing costs as they have to pay duties on inputs. This has particularly hit small exporters, who work on meagre resources and for whom getting bank financing is tough.
Besides seeking a blanket exemption from payment of GST and a deferred payment on goods not exported, as a likely solution to the problem exporters are also favouring use of e-currency where no physical exchange of money is involved.
Refund mechanism in place
The Government has put in place a two-pronged refund mechanism for exporters. They can export by furnishing a bond instead of paying the integrated GST, and claim the refund of unutilised input tax credit. Alternatively, they can export after payment of IGST and then claim the refund.
In the first scenario, exporters get a 90% refund within seven days of acknowledgement of the refund application and the rest in 60 days. In the second, they get 100% refund within 60 days. But many exporters are unsure about the process.