Exporters to face two constraints if refund scheme is introduced: FIEO

The Federation of Indian Export Organisation (FIEO) has highlighted two constraints of the white paper on Value Added Tax (VAT) on exporters presented recently by the finance minister, P Chidambaram.

A FIEO press statement said that while welcoming the white paper on VAT, A Sakthivel, chairman, FIEO-Southern Region, said that if the refund scheme is introduced exporters will face two major constraints.

The first constraint is that the exporters will have to block their funds which will add to the transaction costs.

The second constraint is the exporters will have to depend on the state government for the refund of VAT and it is likely that most of the state governments with their given financial position will take their own time in releasing the refunds.

FIEO has suggested the total exemption of the exporters from VAT through the mechanism of self-declaration is a form similar to form 'H'.

This will be similar to the facility as applicable to special economic zone units and 100 per cent exports oriented units by introducing self-declaration system. The organisation has stated that this would go a long way in streamlining the VAT provisions and also simplifying the entire scheme.