CBEC needs to bestir itself on GST rules
Last week, the Central Board of Excise and Customs (CBEC) issued full-page advertisements in some newspapers, highlighting ‘what exporters need to know’ under the goods and services tax (GST) regime. Essentially, it conveyed the major points in some of the notifications and circulars regarding information to be furnished in the shipping bill, furnishing of letter of undertaking (LUT) or bond and claiming of duty drawback.
Despite this publicity, most exporters were struggling to get answers to specific queries. CBEC circular no. 4 dated July 7 relieved the immediate pressure by allowing exporters to send their goods without payment of Integrated GST (IGST), against a bond or LUT furnished earlier. A notification issued simultaneously allowed recognised export houses and those who had earned at least ~1 crore in foreign exchange last year to furnish an LUT.
The circular asked exporters to submit the LUT/bond in the revised format latest by this month-end. It clarified that a running bond amount covering the outstanding tax liability on exports would do. It gave jurisdictional commissioners the discretion to ask for a bank guarantee up to 15 per cent of the bond amount, based on the track record of the exporter. However, it did not stipulate the documents to be submitted to prove the good track record.
The circular also made no distinction between units in special economic zones (SEZs), export oriented units (EOU), merchant exporters or other exporters. CBEC’s field formations introduced their own differentiation. Some of these refused to accept an LUT from SEZ export houses, asked EOUs and merchant exporters to furnish only bonds, asked for bank guarantees even when the exporter had an excellent record and so on.
Exporters faced major problems due to Public Notice 80/2017 dated June 27 of the Jawaharlal Nehru Customs House (JNCH) at Nhava Sheva (Navi Mumbai). It asked all exporters claiming drawback to declare no input tax credit of CGST/IGST had been availed of for any of the inputs or input services used in the manufacture of the export goods or that no refund of IGST paid on export goods shall be claimed. And, that Cenvat credit on the inputs or input services used in the manufacture of the export goods had not been carried forward in terms of the CGST Act.
These declarations are required only when exporters claim drawback at composite rates and not when they claim only the Customs portion of the All Industry Rates. But, as the Trade Notice did not bring out this distinction clearly, many exporters who could not give such declarations were forced to file free shipping bills and export their goods. They lost their entitlement of the customs portion of drawback. For their imports, EOUs are now required to follow the simplified procedure prescribed in the Customs (Import of Goods at Concessional Rate of Duty) Rules, notified on June 30. Under these, EOUs are required to furnish a continuity bond with such surety or security as deemed appropriate by the jurisdictional assistant/deputy commissioner. Many EOUs ended up meeting unreasonable demands for bank guarantees, in addition to their bank guarantees against multi-purpose B17 bonds already furnished.
Clearly, exporters are suffering a lot of harassment and unnecessary financial costs since the introduction of GST. The CBEC should identify and remove the gaps in its instructions and ensure a smooth transition to the GST regime.