A much-needed relief for exporters
After the Goods and Services Tax (GST) Council meeting on Friday, exporters must be feeling relieved, happy and thankful. They have to now recover quickly from the blows and compete hard to take advantage of the opportunities that have opened up due to the smart recovery of global economy and trade this year.
Exporters will start getting refund of the Integrated GST (IGST) paid on the products exported in July and August from October 10 and October 18, respectively. It appears the refund of input tax credit on account of exports without payment of IGST may be delayed. We have to wait for the notifications. However, any refunds will certainly help exporters get over their problems of working capital shortage.
The upfront exemptions for imports or domestic procurement under advance authorisations and EPCG (export promotion capital goods) authorisations will now be restored till the end of this fiscal year. Similarly, export-oriented units will also be able to import or procure domestically, the inputs and capital goods required for export production till March 31 of next year. These measures will not only help shore up the working capital of the exporters but also help them upgrade their production facilities at lower cost.
Merchant exporters, who had to cough up GST at full rate while procuring goods from supporting manufacturers, will have to pay only 0.1 per cent tax till the end of March, 2018. We have to wait and see how the law gets amended and what conditions and safeguards are prescribed to make this provision operational. For now, they can feel hopeful that their working capital requirements will get reduced.
A new scheme of crediting a notional amount in the e-wallet of exporters has been envisaged. An exporter can use this advance credit to pay the IGST or GST on his procurements and use the refunds to pay back this advance credit. The scheme will be introduced from the beginning of next fiscal year. We have to wait and see how the scheme gets designed but the idea of advance credit itself is a novel one that should cheer exporters, because their borrowings can go down to that extent.
Imports under duty credits issued under the Merchandise Exports from India Scheme and Services Exports from India Scheme will continue to attract IGST. Sale of the scrips are to be exempted from payment of the GST. For export of goods without IGST payment, the Central Board of Excise and Customs has now allowed all exporters with clean record to furnish a legal undertaking (LUT) on their letterhead. No bond or bank guarantee need be furnished. This will help small exporters of goods and services who had less than ~1 crore in exports in the preceding year. The government has deferred introduction of eway Bill and given relief to small businesses in filing returns, composition scheme, exemption on supplies by unregistered dealers, etc. All the notifications giving effect to the changes approved by the GST Council are expected within a week.
It is comforting that the government is willing to hear the problems of the trade and make necessary course corrections. It reminds of a famous quip attributed to Winston Churchill about Americans. Rephrased suitably, we can trust this government to do the right thing after exhausting all other options.