Exporters in a spot as GST refunds delayed

High volume sectors seek change in norms, as four months of taxation has led to liquidity crisis for SMEs

Exporters have said their failure to receive goods and services tax (GST) refunds is dragging down the sector.

“After paying the GST four months in a row and without receiving any refunds, small and medium enterprises are at a breaking point. There is an immediate need for remedial measures to prevent a further decline in exports,” said Ganesh Kumar Gupta, president of the Federation of Indian Export Organisations.

In the GST regime, exporters have to pay taxes on realised profits upfront and then apply for refunds.

Exports grew for 13 straight months, peaking at over 25 per cent growth in September, but then declined in October by 1.12 per cent.

Gupta added that production had declined sharply in employment-intensive sectors such as leather goods, jewellery and garments. Smaller industries such as handicrafts and carpets, which are more sensitive to tariff and price movements, have become unstable.

The Export Promotion Council for Handicrafts is preparing a proposal for a financial package for the sector, according to officials.

The GST refund process has been delayed because the government extended the date of filing the GST returns, according to the EEPC. The July refunds will thus only be available in the third week of November.  Exporters also alleged that implementation of measures approved by the GST Council was slow. They added specific difficulties in filing returns remained.

Garment exporters had recently told a parliamentary standing committee that the GST had not helped the sector.

Struggling to stay afloat

* Under the GST regime, exporters have to pay taxes on realised profits upfront and then apply for refunds

* Exports grew for 13 straight months, peaking at over 25 per cent growth in September, but then declined in October by 1.12 per cent

* The GST refund process has been delayed because the government extended the date of filing  the GST returns

* The Export Promotion Council for Handicrafts is preparing a proposal for a financial package for the sector

“The overall effect on apparel exporters, especially SMEs, is burdensome due to a substantial increase in working capital requirements and higher transaction costs,” said Ashok G Rajani, chairman of the Apparel Export Promotion Council.

The body wants extension of the Integrated GST exemption on imports under the Export Promotion of Capital Goods (EPCG) scheme and the Advance Authorisation scheme from March 2018 to December 2018.

However, some are hoping the government’s decision to reduce the rate of taxation for a wide variety of products would help shore up growth prospects. “The announcement by the Council to bring leather goods and leather garments under the 18 per cent slab, from the 28 per cent earlier, and finished leather to under 5 per cent slab, from 12 per cent earlier, is a big relief to our industry” Mukhtarul Amin, Chairman of the Council for Leather Exports.

STORY IN BRIEF

• GST still pummeling exports, say traders

• MSMEs going through severe liquidity crisis as tax refunds under GST regime still not materialising

• Sharp fall across major employment-intensive sectors such as leather & leather products, gems & jewellery, readymade garments

• After witnessing continuous growth for thirteen straight months and peaking at more than 25 per cent growth in September, India's exports fell for the first time in October by 1.12 per cent

• Traders express concern over 'slow' implementation of measures approved by the GST Council back in October