Post-GST haze may delay foreign trade policy Intelligence arm to be regulator of gems & jewellery sector

The mid-term review of the Foreign Trade Policy had earlier been scheduled for release on July 1 along with GST

The mid-term review of the Foreign Trade Policy (FTP) is struggling to meet its September deadline, despite being pushed back from its initial release date of July 1, sources say.

Senior government officials claimed work was on the fast track. But they were not sure if the revised policy can be released by September. Assessing the effects of the goods and services tax (GST) regime on the export system and the export promotion schemes were throwing up new challenges every week, they explained. As of now, the government is busy trying to deal with the issue of exporters losing a major chunk of their working capital, because of GST. Complaints by exporters regarding reduced utility of duty credit scrips, which only cover basic Customs duty and not the integrated GST, were also being looked into, a senior commerce ministry official said under condition of anonymity.

The government had brought forward the FTP release date to coincide with July 1 GST roll-out. But the date had to be deferred to take into account the post-GST changing trends in trade.

Exports nationwide were stuck as small and medium companies faced transitioning difficulties and also because the overhaul of the export infrastructure was slow. They now also have to deal with state tax authorities who were not familiar with export procedures and, therefore, not willing to endorse documents. All this happened even as the government moved fast to make key changes to procedural norms — including clarifications on calculation of currency exchange rates for drawback, changes to certification procedures and provisions changing the requirement of bonds and letters of undertaking. Exportpromotionschemes Discussions have also continued over the fate of several export promotion schemes, despite the latest Economic Survey pointing out the need to phase out or streamline some. “Many duties have The govt is busy trying to deal with the working capital loss suffered by exporters Complaints by exporters on the reduced utility of duty credit scrips are being probed Discussions have also continued over the fate of several export promotion been subsumed under the GST and if tariffs are reduced to be realised or near realised levels, some export promotion schemes can be phased out,” the Survey had said.

Senior officials have, however, uled out significant changes to export promotion schemes, owing to their scale and the lack of alternative ones. “… any major changes to the scheme will affect exporters significantly,” said L Badri Narayan, taxation partner at law firm Lakshmikumaran & Sridharan. Recognised exporters of manufactured goods receive credit incentives, generally in the form of duty drawbacks. The three major sector-specific ones are the Advance Authorisation Scheme, Export Promotion Capital Goods Scheme and the Merchandise Exports from India Scheme. Tradetarget Officials suggested differences of opinion about schemes, despite the Economic Survey pointing out the need to phase out some or streamlining them Differences of opinion about whether to officially reduce the current export target of $900 billion was also holding things up whether to reduce the current export target of $900 billion was also holding things up. Senior commerce and industry ministry officials had earlier said the target might be reduce, after exporter bodies had informed the government of difficulties in meeting the target. Federation of Indian Export Organisations Director General Ajay Sahai said exports would need to grow at a compound rate of 27 per cent annually till 2020 for the existing target to be reached.

The introduction of the GST and the ensuing confusion over the operation of export promotion schemes slowed exports, further dragging down the prospects of the sector. “With global trade growth forecasts still slow at 2.4 per cent, I’m expecting a compound growth of 15 per cent annually for India’s exports,” Sahai said. This will allow exports to reach a cumulative $700-750 billion by 2020, he added. The newly created GST intelligence arm, Directorate General of Goods and Service Tax Intelligence (DGGSTI), has been named the regulator for dealing with money laundering cases in the gems and jewellery sector. The finance ministry last week amended the Prevention of MoneyLaundering (Maintenance of Records) Rules, 2005, to make the DGGSTI as the regulator with respect to the gems and jewellery sector, said the notification. The regulator, under PMLA, issues guidelines and prescribes measures to establish client identity in different transactions. It may prescribe enhanced or simplified measures to verify the client’s identity taking into consideration the type of client, business relationship, nature and value of transactions based on the overall money laundering and terrorist financing risks involved, the rules state. Under PMLA, every reporting entity is required to maintain a record of all transactions of value exceeding ~10 lakh, all cross-border wire transfers of more than ~5 lakh and all purchase and sale of immovable property of ~50 lakh or more. Rules provide for “client due diligence” by the reporting entity to prevent money laundering or terrorist financing. After the amendment, the DGGSTI would now keep a track of transactions in the gems and jewellery sector to see if they are in conformity with law. Experts said this is likely to give power to the DGGSTI in the line with that of sales tax officers to go to shops and check whether money laundering has happened.