Export norms changed further to clear procedural mess post-GST

Customs dept has issued clarification on exchange rate for drawback purposes, supply rules to SEZs

In a move to sort out the procedural mess that exports have got stuck into after the roll-out of the goods and services tax (GST), the Customs department has notified that currency exchange rates for drawback purposes would be announced on a fortnightly basis, as was the case earlier.

“Customs duty is payable only in the rupee, and GST norms had stipulated that foreign exchange conversions should be according to the Reserve Bank of India’s reference rate, which is updated on a daily basis. Traders had complained that it made processing large volumes of payments difficult,” said Abhishek Jain, tax partner, EY. Now, traders can go back to paying the free-on-board (FOB) value of exports based on the rupee value according to the exchange rate notified by the Customs department for drawback purposes, Jain said. For services exports, any generally accepted accounting basis is allowed.
 

The circular also allowed self-certification for higher duty drawback. “Being asked to furnish a certificate from tax authorities stating that exporters will not claim benefits under the new GST regime if he claims higher duty drawback was causing problems,” said Ganesh Gupta, president, Federation of Indian Exports Organisations (FIEO).

Tax authorities were not issuing such a certificate and, in its absence, grant of lower drawback was affecting the liquidity of businesses, especially those operating in the small and medium enterprises segment, and complicating administrative work at the exporter’s end, he said.
 

Even services exporters are facing roadblocks — previously not having had to submit any letters but now required to do so. “Exporters are reluctant to export as getting certificate from GST authorities only adds to the transaction time and cost,” FIEO said in a representation to the finance ministry. The new move is expected to save the transaction time and cost, but exporters have been advised to to do their own calculation while claiming higher drawback as they have to forego IGST refund/ITC refund/carry forward of CENVAT credit.

The circular also clarified that while supplying to SEZs for export purposes or otherwise, traders need to mention whether it was being done under an LUT (letter of undertaking) or a bond. After the GST implementation, exporters had raised the issue of lack of clarity on norms relating to submission of bonds or LUTs for clearance of export consignments and sought IGST exemption. However, earlier this  month, the government had said big exporters with a good track record can give an LUT to the customs department while small exporters would have to give a bond to seek IGST exemption. But problems in this regard have persisted.

The government had mentioned that those exporters who had received inward forex remittances exceeding Rs 1 crore in the previous financial year were eligible for LUTs, effectively edging out a large number of SME exporters, Jain added. On the other hand, a bond now needs to be accompanied by a bank guarantee to the tune of 15 per cent of bond amount, he added.

Among other issues, exporters pointed out the fact that they now have to deal with state tax authorities who are not yet aware of export procedures and therefore not willing to endorse documents. Exporters also wanted clarity on whether IGST on exports should be paid in FOB or cost and freight.