Exporters fear GST would disrupt trade promotion schemes

The implementation of the goods and services tax will have a disruptive influence on the various export promotion schemes, chairman of the Engineering Export Promotion Council (EEPC) T S Bhasin told a meeting of the Board Of Trade.

The Board of Trade headed by commerce and industry minister Nirmala Sitaraman met on Tuesday ahead of the 1 July roll-out of the GST to discuss issues related to the implementation of the new indirect tax regime.

Presenting the case of engineering exports at the BOT meeting, EEPC India chairman T S Bhasin said the administration of GST would make it difficult for exporters to derive benefits of different schemes like MEIS/Advance Authorisation of Imports, Export Promotion Capital Goods (EPCG).

He cited the case of the Advanced Authorisation scheme where imports at present are exempted from all duties, including basic customs duty, countervailing duty, additional excise duty, anti-dumping and safeguard duty so as to enable free import and reexport of manufactured product. However, under GST, it will not be entirely duty-free, he added.

''We are given to understand that under the GST regime, only Basic Customs Duty will be exempted but IGST will have to be paid on rest of the duties. This should be waived for imports under Advance Authorisation. We are worried that there will be fall in exports if this anomaly is not corrected,'' the EEPC India said.

Also, while at scrips under the MEIS scheme now attract 5 per cent VAT, these would attract 18 per cent GST.

Besides, there are uncertainties over the mode of GST refunds. ''We understand from our interaction with the authorities that no refund module has yet been developed and hence we wish to know how the GST will be refunded-like drawback which is without any application or like rebate of excise,'' Bhasin said.

Under the new tax regime the exporter will have to pay 18 per cent GST for engineering job work, against nil at present, while in the case of textile and gems and jewellery, the GST rate has been fixed at 5 per cent. ''It was earlier stated that job work will be exempted and it is our request that job work be exempted from GST,'' said Bhasin.

Likewise, lot more clarity is required with regard to closing stock as on June 30.

He also raised the issue of input credit which, under the new tax regime, will be available only if it is deposited by the seller. For exports, he said, this would lead to taxes being exported with the products.

The BOT meeting also discussed issues like disruptions in trade in the Middle East after trade isolation of Qatar by major countries in the region and the payment problems in Iran.

Bhasin also suggested raising the maximum investment limit in MSMEs from Rs10 crore to Rs30 crore in order to increase the share of manufacturing in overall GDP from 16 per cent to 25 per cent.

Commerce and industry minister Nirmala Sitharaman who chaired the second meeting of the reconstituted Board of Trade on Tuesday, said the government is fully seized of the concerns of the exporters and is engaged in intensive inter- departmental consultations with the Department of Revenue and ministry of finance on their concerns related to GST. She directed the officers of the Department of Commerce, Department of Revenue and DGFT to consider all the issues appropriately for the Mid-Term Review of the Foreign Trade Policy (FTP).

The meeting was attended by representatives of industry, industry associations, export promotion councils and commodity boards. Officials, including secretary-commerce, secretary-DIPP, secretary-pharmaceuticals, DGFT and senior officers from DGFT, Department of Commerce, ministry of external affairs, Department of Revenue, ministry of civil aviation and other ministries and departments, attended the BOT meeting.