Exporters face capital crunch after GST

new delhi — Exporters are having a tough time since the roll-out of the new indirect tax regime as the online facility to claim refunds is not yet available, with many even postponing shipments as they grapple with low funds, stakeholders and experts have said.

The worries are greater for small and medium exporters who have a turnover of less than Rs200 million as their cost of working capital has significantly risen with refunds not coming so far under the Goods and Services Tax (GST) regime.

“We estimate an additional working capital of Rs15 million to Rs20 million. At present, refunds can’t be claimed as Goods and Services Tax Network [GSTN] system is not yet operational. We have to pay GST on procurement and also keep control on all vendors to ensure they pay GST,” Vilas Phule, CFO, Magna Steyr India, which exports engineering services in the automobile sector, said. The company with a monthly turnover of Rs60 million to Rs80 million, exports services worth Rs40 million to Rs60 million every month.

Certainly, this was putting exporters in a lot of working capital pressure, he added.

Jigar Doshi, partner, SKP Business Consulting, said: “At present, exporters are unable to file refund claims online as no facility/utility is available on the GSTN website and is unknown as to when it will be made available. Now, working capital blockage is proving to be a big hurdle, particularly for small exporters, who do not have deep pockets.”

GST expert Pritam Mahure said: “In the GST regime, exporters are facing challenges as upfront exemption is not available and working capital of exporters is getting blocked. I hope the government forms a high-level committee to address their challenges or else the working capital blockage can derail the struggling exports scenario in India.”

In the previous indirect tax regime, exporters enjoyed upfront tax exemption on goods to be exported. But under GST, exporters are procuring goods and services on payment of GST. This credit of GST, which is available with exporters is supposed to be claimed as refund.

Under GST, there is also Integrated GST applicable on the export turnover, for which two methods are available — one to export without payment of GST (under cover of letter of undertaking or bond) and second with payment of IGST and then claim refund of it.

Amar Kulkarni, CFO, Hoerbiger India, said: “Given the working capital pressure, many exporters are postponing exports and struggling for funds.”