SMALL MEDIUM exporters worst hit
The small and medium exporters have been severely impacted as there cash flow is blocked, they have limited funds available and now they are not able to pay to their workers and vendors also. The complete supply chain is in mess. “In garment export cash flow is required to make purchase as then only we can get into production, but we are really facing very tough time because we have not been refunded,” said an exporter from Delhi.
According to the pay first-refund later mechanism of GST, there always a 20 to 30 cent blockage in every dollar 5 garments were sold.
The working capital of export industry has increased specifically for small and medium enterprises after the implementation of Goods and Services Tax (GST). Under
GST, exporters firstly have to pay integrated GST (IGST) and they are entitled to get the refund once goods are exported. For smaller exporters, it is mandatory to furnish the bonds and letter of undertaking from the local commissioner, it creates a financial burden specifically for the exporters.
Yet, there is no clarification on the refund mechanism for exporters which is making the situation worst. Exporters are entitled to get refunds under GST on the tax they already paid. Under the previous tax regime (VAT), the exporters imported capital goods and raw materials without paying any duties, which didn’t influence the cash flow.
The basic customs duties are exempted under GST and exporters are not required to pay it. Since
GST functions on the principle of refund and not exemptions, delays in the refund process severely strains working capital management of exporters.