GST narrows ambit of duty credit scrip use by exporters

Earlier, they used these scrips for payment of Customs, excise duty and service tax

Implementation of the Goods and Services Tax has limited the use of duty credit scrips by exporters as these can now be utilised only for payment of basic Customs duty and not IGST.

These scrips, a type of certificates that carry certain monetary value, are key export promotion incentives extended by the government to exporters under the foreign trade policy.

Earlier, manufacturing exporters who import raw material for the export purpose were allowed to utilise these scrips for payment of Customs, excise duty and service tax.

"The duty credit scrips cannot be used for payment of IGST (Integrated Goods and Services Tax) and GST compensation cess in imports, and CGST, SGST, IGST and GST compensation cess for domestic procurement," said the Directorate General of Foreign Trade in a trade notice.

Concerned over this, exporters body FIEO has approached the government to widen utilisation of the scrips.

"Exporters should be allowed to utilise the scrips for payment of levies such as income tax and computation fee so that its utilisation gets better," Federation of Indian Export Organisations (FIEO) Director General Ajay Sahai said.

The government gives these scrips under two export incentive schemes - the Merchandise Exports from India Scheme (MEIS) and the Service Exports from India Scheme (SEIS).

Sahai also said exporters are worried as they have to arrange funds for payment of GST which will be refunded to them upon exports.

"This may lead to a blocking of funds for over six months in many cases, thus affecting competitiveness of exports," he explained.

He added that many of the importers are not sure about the mechanism of imposition of IGST on imports as well as compensation cess for a few specified products.

The Central Board of Excise and Customs should organise a workshop for small importers to clarify computation of import duties.

Asked about the impact of GST on units in special economic zones, which are export hubs, Sahai said the SEZ units are awaiting amendment of the SEZ Act for which an ordinance is expected.

"In absence of the ordinance, units may not get an exemption from IGST on their imports," he said.