DGFT slackness on needed GST detail

Exporters are hit hard due to denial of GST exemption on their imports or procurements

In the run-up to the goods and services tax (GST) regime, the commerce ministry seems a spectator. The Directorate General of Foreign Trade (DGFT) sought relevance by posting useful guidelines for exporters and importers but these are marred by some unnecessary indiscretions.
 
The DGFT’s Trade Notice no 11/2008 dated June 30 says for items covered under the GST, no Advance Release Order (ARO) facility will be available under the Advance Authorisation and Export Promotion Capital Goods (EPCG) scheme.  Also, Export Oriented Units (EOU) can sell in the Domestic Tariff Area (DTA), subject to some conditions. These include refund of any benefits taken on procurement of inputs from the DTA under Chapter 7 of the Foreign Trade Policy (FTP) and used in the manufacture of products under DTA sale. 
 
These changes amount to FTP amendments which can be done only through a notification issued by the central government, not a trade notice. The DGFT claims the notice was issued with approval of the competent authority. Which authority is competent to approve doing something beyond its powers and without jurisdiction?
 
Under the FTP, the facility of domestic sourcing under the advance authorisation and EPCG schemes continue to be available through the invalidation letter route. The GST is payable on such deemed export supplies against invalidation letters. The DGFT says the customs portion of duty drawback may be claimed against such deemed export supplies. However, Para 7.04 of the FTP does not allow this benefit for supplies against invalidation letters. So, there is confusion at the operating levels.
 
In its replies to the list it out on ‘Frequently Asked Questions (FAQ)’, the  DGFT says on imported items covered under the GST, duty credit scrips issued under the Merchandise Exports from India Scheme (MEIS) and Services Exports from India Scheme (SEIS) can be used for payment of basic customs duty, safeguard duty, transitional product-specific safeguard duty and anti-dumping duty. This guidance is not backed by the exemption notifications issued by the finance ministry.
 
The related notifications 24/2015-Customs and 25/2015-Customs, both dated April 8, 2015, exempt only the basic duty of customs, CVD and SAD (i.e. the additional duties of customs levied under Sections 3(1), 3(3) and 3(5) of the Customs Tariff Act, 1975). They do not exempt anti-dumping duties or safeguard duties. So, MEIS and SEIS scrips cannot be used to pay these duties, unless the related customs exemption notifications are amended.
 
In another tweet, the DGFT says the HSN Code for Chapter 3 scrips falls under Classification 4907, attracting a 12 per cent GST rate. It also asks this be got confirmed from the Tax Research Unit in the Central Board of Excise and Customs. Is it easier for thousands of traders in duty credit scrips to approach the TRU for confirmation or for DGFT to get it confirmed from the TRU and give a firm and conclusive opinion?
 
Exporters are hit hard due to a strengthening rupee, increased working capital requirement due to denial of GST exemption on their imports or procurements under advance authorisations, falling premiums on duty credit scrips and procedural difficulties in execution of export orders. DGFT’s efforts to guide them in the transition to a GST regime are commendable but it should give instructions with due attention to the details.   E-mail: tncrajagopalan@gmail.com