MUMBAI: Exporters say they're facing difficulties owing to ambiguity about benefits continuing under goods and services tax (GST) from the previous tax regime and queries over accessing input credit, further clouding their prospects amid a dull global market and an appreciating rupee. Some of them have sought clarity on the matter from the Government ahead of the peak export season, said people in the know.
The development has led to exporters being unsure about pricing products set for the European Union (EU) and the US and warnings that overseas sales could suffer a setback in the upcoming quarter. The Foreign Trade Policy, FTP 2015-2020, has several incentives based on the earlier levies such as excise duty and service tax. It had been expected that these incentives would be recalibrated under GST but that hasn't happened, exporters said.
"There is an urgent need for the Government to clarify on the incentives available to exporters as their tax outgo has changed in GST," said MS Mani, partner, Deloitte India, adviser to some top exporters. "It is expected that the newly constituted committee headed by the Revenue Secretary Mr. Hasmukh Adhia would fast track its recommendations so that exporters get much needed clarity ahead of the peak export season and are able to plan accordingly."
While one option would have been to provide an exemption in the GST legislation to procurements made by exporters, the Government has provided a mechanism under which exporters pay the applicable tax to vendors and claim a refund on input taxes. "There are very stringent timelines provided for grant of refunds to exporters in the GST law," admitted the person cited above. But exporters aren't sure whether these would actually be followed, based on their past experience with refunds, the person added.
Many exporter groups have raised the matter with the Government in the past few months. The Adhia committee is set to evaluate the problems faced by exporters. "Since the export incentives/schemes are regulated by the Commerce Ministry, it's expected that the committee headed by Adhia would also have representatives from the Commerce Ministry in order to fast track the recommendations and to avoid inter-Ministerial roadblocks," said another person close to the development.
Sachin Menon, National Head of Indirect Tax at KPMG, said, "There seems to be no harmony between HSN codes in the GST portal and ICEGATE (portal run by the CBEC) for a few products. This means that some of the exporters may not be able to take input credit for the exports and would directly impact their cash flows till this issue is resolved."