Exporters seek clarity on incentives under GST : 14-09-2017
Exporters say they’re facing difficulties owing to ambiguity about benefits continuing under goods and services tax (GST) from the previous tax regime and queries over accessing input credit, further clouding their prospects amid a dull global market and an appreciating rupee. Some of them have sought clarity on the matter from the government ahead of the peak export season, said people in the know.
The development has led to exporters being unsure about pricing products set for the European Union (EU) and the US and warnings that overseas sales could suffer a setback in the upcoming quarter. The Foreign Trade Policy, FTP 2015-2020, has several incentives based on the earlier levies such as excise duty and service tax. It had been expected that these incentives would be recalibrated under GST but that hasn’t happened, exporters said.
“There is an urgent need for the government to clarify on the incentives available to exporters as their tax outgo has changed in GST,” said MS Mani, partner, Deloitte India, adviser to some top exporters. “It is expected that the newly constituted committee headed by the revenue secretary (Hasmukh Adhia) would fast track its recommendations so that exporters get much needed clarity ahead of the peak export season and are able to plan accordingly.”
Sales surge in EU and the US during the Christmas period and exporters need to ensure that goods are shipped in September or at least October to catch that bump. “This is the need of the hour as the objective of the FTP is to ensure that goods are exported and not the taxes associated with the procurement or manufacture of these goods,” said a person with direct knowledge of the matter. “Since the GST rates are not identical to the erstwhile indirect tax rates and because there is no exemption on procurements for exporters, the exporting community is not clear on whether the incentives would increase, decrease or remain the same.”
While one option would have been to provide an exemption in the GST legislation to procurements made by exporters, the government has provided a mechanism under which exporters pay the applicable tax to vendors and claim a refund on input taxes. “There are very stringent timelines provided for grant of refunds to exporters in the GST law,” admitted the person cited above. But exporters aren’t sure whether these would actually be followed, based on their past experience with refunds, the person added.
Many exporter groups have raised the matter with the government in the past few months. The Adhia committee is set to evaluate the problems faced by exporters. “Since the export incentives/schemes are regulated by the commerce ministry, it’s expected that the committee headed by Adhia would also have representatives from the commerce ministry in order to fast track the recommendations and to avoid inter-ministerial roadblocks,” said another person close to the development.
Exporters are also facing problems over claiming input credit for goods exported because of mismatches in Harmonised System Nomenclature codes for about 230 products — mainly dyes and dye intermediates. The code is used globally to classify goods for taxation and for claiming domestic benefits. This means that purchase invoices and shipping bills appear to be those of different products to GST’s information technology (IT) network. Exporters are therefore unable to get credit, impacting their cash flows.
“HSN Code No. for 233 products have been revised in 2017 and results (in a) mismatch with what is on India’s GST Network — that is the HSN code of 2012,” a Mumbai-based exporter of sodium meta nitro benzene told ET. “Now the purchase in invoice and shipping bills for the same product will be a mismatch due to different HSN Code number for the same product.”
Sachin Menon, national head of indirect tax at KPMG, said, “There seems to be no harmony between HSN codes in the GST portal and ICEGATE (portal run by the CBEC) for a few products. This means that some of the exporters may not be able to take input credit for the exports and would directly impact their cash flows till this issue is resolved.”
Source : Economic Times