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Tweak GST rules or exports will suffer: Industry tells Adhia

Trade & industry bodies have warned that slowdown in orders, liquidity crisis may lead to Rs 65,00 cr of exports getting stuck

Subhayan Chakraborty  |  New Delhi 


A severe slowdown in foreign orders, combined with a growing liquidity crisis, may get out of hand by the year-end if rules of export under the goods and services (GST) are not altered soon, bodies have warned.

At a meeting with Revenue Secretary Hasmukh Adhia-led GST committee - set up to look into exporter concerns on Tuesday - trade and bodies pointed out that the deferment in mandatory filing of GST return forms as well as extreme difficulty in receiving returns was hurting exports, sources present said.

This may lead to a Rs 65,000-crore worth of exports being stuck by the end of the year, director-general of the Federation of Indian Exports Organisations (FIEO), Ajay Sahai said.

Two months after the roll-out of the GST in July, the order books of exporters are said to have taken a hit, with estimates pegging the impact to up to 15 per cent across industries and product categories.

According to an assessment by the FIEO, the large drop was for export orders that were meant to be delivered until October. Beyond October, this may rise to 20 per cent, as exports during Christmas and New Year may be affected.

After growing in single digits in the previous three months, August exports had risen by 10.29 per cent, up from 3.94 per cent in July. But exporters and economists alike remain sure that the coming months would prove to be the real challenge for merchandise exports.

That is largely due to the refund issues under the GST still remaining two months down the line, exporters complaining of crippling liquidity, and the rupee expected to climb steadily in the coming months.

The deferment of the mandatory filing of GST return forms are holding up refunds for exporters and magnifying the liquidity crisis being faced by the sector, exporters have told the government.

They have also pointed out that due to the government’s decision to defer the filing of GSTR forms 1, 2 and 3 for July, huge capital has been blocked. The government has extended the filing of all three forms for the month of July to October 10, October 31 and November 10, respectively.

“If the current situation persists, the liquidity crisis for exporters will become even more difficult, as they would receive no refunds for four months from July to October,” Sahai said. As an immediate measure, he said refunds should be provided on the basis of GSTR-1, with excess refunds being adjusted after regular filing by exporters later. 

On this note, the Confederation of Indian (CII) has suggested the government consider special initiatives for promoting exports, including examining certain provisions under the GST

According to the CII, of integrated GST (IGST) for imports should be allowed to be debited under the advance authorisation scheme. Further, advance receipts for exports should be exempt from of  

The chamber has also pointed out that the new GST rules should be updated, so that a manufacturer who supplies goods to an exporter for onward trade should be considered as an exporter. Thus, GST should not be applicable on interstate sales by manufacturers to export trading houses, similar to what had been the case earlier, it said.

Issues galore on GST for exports
  • Exporters claim liquidity crunch has reached crisis levels due to GST
  • This has led to orders being forgone; orders fell by 15% till October
  • Govt decision to defer mandatory filing of GST return forms are holding up refunds
  • Other returns such as those under advance authorisation scheme also stuck

First Published: Wed, September 20 2017. 01:46 IST