New tax to hurt exporters

New tax to hurt exporters (GST to impact liquidity, thereby affecting competitiveness)

Context: The Federation of Indian Export Organisations (FIEO), the apex body for the country’s exporters, pointed out that the Goods and Services Tax (GST) regime would impact the liquidity of the exporters and in turn hurt export competitiveness.

Introduction:

• Exporters used to get ab-initio exemptions from duties before implementation of GST. Now, they have to pay first and then seek refund. Due to this process, the FIEO stated that about Rs 1,85,000 crore will get stuck with the government..
• Exporters are worried about liquidity issues as the refund mechanism would require payment of GST first and get refund subsequently.
• The government is looking into various options to neutralize the impact of the GST regime on the export sector.

Possible consequence of GST on exporters:

• The GST will severely dent the liquidity of the exporter and increase the compliance cost of merchant exporters.
• Export sector would be losing export competitiveness by about 2% and this will be a big blow for exporters.

Demands of FIEO:

• FIEO had asked the government to provide interest on delay in payment of refund of taxes and duties after 10 days of exporters filing claim under the GST regime.
• The additional cost of credit to manage the liquidity should be borne by the government, if the present exemption is brought forward in the GST.

Government’s initiative

• The government is looking into various options to neutralize the impact of the GST regime on the export sector.
• As per the refund rules, the interest on delayed payment would be due only after 60 days.
• Earlier, the government had appointed nodal officers at the Directorate General of Foreign Trade and the Central Board of Excise and Customs to look into the concerns of exporters with regard to the GST regime.

About FIEO

• Federation of Indian Export Organisations (FIEO) is a trade promotion organisation in India, jointly established in 1965 by the Ministry of Commerce of the Government of India and private trade and industry.
• The FIEO is responsible for representing and asking Indian entrepreneurs and exporters in foreign markets.