Days after exporters
informed the government that the Goods and Services Tax
(GST) regime had created crippling liquidity
in the sector, leading to stranded shipments and forgone orders, the government says these aren't true.
On Friday, the finance ministry said that the proportion of the problem was being inaccurately depicted and that it was working to soon resolve it.
"There are lot of apprehensions expressed in the media about the problem of blockage of working capital for exporters
Various figures also being discussed on the blockage of such funds, which are wild estimates. Such media reports are not based on facts," the ministry said in a press release.
have complained over a severe lack of working capital since GST
was introduced. They were earlier allowed duty-free import
of goods that are used for making export products. With GST, they have to first pay the duty and later apply for a refund. This issue of liquidity
crunch was flagged by exporters
as the most challenging issue. Their costs
rose by up to 1.25 per cent (Freight On Board
value) after GST
implementation, it is estimated.
On Tuesday, they raised the issue at a meeting with the committee on exporters' issues with GST, chaired by the revenue secretary, Hasmukh Adhia.
At present, the government says, there is no fund blockage for two-third of the value of export. On these, it says, traders
have preferred the duty drawback scheme
(DDS), instead of taking actual refund of input taxes.
DDS was extended in the post-GST
regime for three months, till the end of September.
allege that getting refunds for the state component of the levy had become very difficult under DDS, with the requisite mechanism not in place. "While it is still possible to get states to pay for their share of refunds under the Integrated GST, those refunds which are to be paid fully by them (states) are not materialising," Ajay Sahai, director-general of the Federation of Indian Export Organisations, had told Business Standard
last week. The problem was across the country, he added.
Also, the government has said, the remaining third of export by value had always taken the normal refund route for taxes paid on inputs for central excise
separately and for value-added tax
separately. As these were made available only after actual export, there had been a normal blockage of funds
for a period of five to six months, except for those using the facility of advance authorisation.
"Hence, the problem is not as grievous as is made out. Notwithstanding this, the Committee on Exports is working on issues of the export sector," it said on Friday.
During the meeting with Adhia, trade bodies had also said the deferring in mandatory filing of GST
return forms, as well as extreme difficulty in receiving tax
returns, was hurting export, sources had said. On this, the government has said that refund may be given by linking the GSTR-1 form with the GSTR-3B one. So, for July, where GSTR-1 has been filed, the authorities would be in a position to process the refund applications.
"Meantime, the authorities of state governments, as well as the central government, have been requested to clear the pending refund claims of central excise
for the pre-GST
period, so that exporters
will get immediate relief," the government has said.
After growing in single digit in the previous three months, August export rose 10.3 per cent, up from close to four per cent in July. However, exporters
and economists say the coming months would prove a challenge for merchandise shipment. Largely due to the tax
refund issues under GST
complaining of crippling liquidity
and the rupee
expected to climb steadily in the coming months.