GST impact: Pile up of export goods weighs heavy on govt

The government is moving fast on combating growing cases of export consignments stuck nationwide, owing to operational difficulties post the implementation of the goods and service tax (GST) regime.

Reports have poured in over the past few days of export consignments across the country remaining stuck at port or factory gates because of confusion among traders as well as tax authorities regarding treatment of exports under the GST.

Both the commerce department and the Central Board of Excise and Customs (CBEC), under the revenue department of the finance ministry, have met export bodies over the last two days and also appointed two senior officers as nodal officers dealing with exporters concerns regarding the new tax regime.

The CBEC had also come out with a notification pointing out certain changes to the tax norms with another notification expected soon, a senior government official said. He added regional tax offices have been directed to bring their officers up to speed with latest norms.

Clearance of exports goods got stuck as input tax credit is not available to pay the Integrated GST (IGST) levied on exports and the procedure of exemption from the IGST against bonds is not yet clear at the field level, Director General of Federation of Indian Export Organisations (FIEO), Ajay Sahai said. It’s also not clear how exporters are to submit these bonds, he added.

On the issue of claiming input credit, the worst hit are merchant exporters, who do not have any carry-over of input credit balance, Bhaskar Sarkar, executive director of Engineering Exports Promotion Council of India said. “Even if they pay the input tax on their purchase and export under bond or LUT (letter of undertaking), their input credit will be refunded only after the end of the financial year.” he added.

Exporters have to furnish a bond or LUT for Customs officials to release export consignments. 

Also, bonds furnished by exporters are now required to be accompanied by a bank guarantee, Sarkar said, which adds to the cost of exports. Existing excise divisions being changed have also made it difficult for exporters to find their correct nodal authority, Sarkar added. 

“While the ministries have addressed the issues after meeting with trade bodies, the lower level bureaucracy operating on the ground are still unaware of the requisite changes in the system,” he said.

Added to this, the software of the customs department was also not updated initially, FIEO President Ganesh Kumar Gupta stated.

However, the issue of exporters facing severe shortage of working capital under the new GST regime have continued to be brought up.

Earlier, exporters were allowed duty-free import of goods that are used for manufacturing export products. However, under the GST, they will have to pay the duty upfront and apply for refunds later.

While the government had earlier promised the duty would be refunded within the first seven days of submission of complete application, it later added a further step of acknowledging each claim within three days after that.

Commerce and Industry Minister Nirmala Sitharaman had said that provisions had been made for additional refunds to the tune of six per cent interest if payments were late. The last 10 per cent of refunds would be subject to verification done by the revenue department. 

However, Gupta said the interest on delayed payment would be received only after 60 days. This will lead to working capital requirements shooting up by 5-20 per cent at least, Gupta added.

A three-member committee comprising Commerce Secretary Rita Teaotia - the head of the committee on duty drawbacks, ex Commerce Secretary GK Pillai, and a finance ministry official had been set up to submit findings to the GST council.

Senior commerce department officials indicated that while they supported the idea that exporters should not have to pay initially, the revenue department had rejected it.