GST India: Impact on Importers and Exporters:

To promote exports from India, governments at both centre and state have provided various exemptions and incentives to exporters under the current indirect tax regime. The export-linked tax incentives extended under the Foreign Trade Promotion include the Schemes namely; Served from India Scheme ('SFIS'), Focus Product Scheme ('FPS'), Focus Market Scheme ('FMS'), Export Promotion Capital Goods Scheme ('EPCG'), Establishment of Export Oriented Units ('EOU'), Special Economic Zones ('SEZ'), Foreign Trade & Warehouses Zones ('FTWZ'), etc.

The tax incentives extended under the FTP principally consist of exemption from Central levies such as Central Excise duty, Customs duty, Central Sales tax, etc. Zero rating of exports under GST ensures that Indian exports continue to be competitive in international market.  This would also result in inverted duty structure as inputs or imports are taxed while exports are zero rated leading to accumulation of Input credit which has to be regularly claimed for refunds. Current indirect tax regime provides for lower or no customs duty on imports for importers who use them in producing goods that are subsequently exported. However under GST, imports would be subject to IGST (CGST + SGST) and any exemptions or additional levy will not exist. This would provide level playing field for domestic manufacturers vis-à-vis importers.

The major import gaining sectors after implementation of GST would be leather and leather products, furniture and fixtures, agricultural sectors, coal & lignite, agricultural machinery, industrial machinery, other machinery, iron & steel, railway transport equipment, printing and publishing and tobacco products. Moderate gainers would be metal products; non-ferrous metals; and transport equipment other than railways. Imports are expected to decline in textiles and readymade garments; minerals other than coal, crude petroleum, gas and iron ore; and beverages.

In case of SEZ, the various exemptions provided under different schemes would be limited in their applicability to export duty only. Exports or Deemed Exports would be zero rated but sale to domestic tariff area would be taxable. Refunds would have to be claimed for accumulated ITC.

Business Process:

SEZ, EOU and other exporters’ registration would be appropriately identified such that any suppliers selling to them would be considered as deemed exports eliminating the need to obtain statutory (H) forms.

With respect to return filing, in case of export of goods, there is time lag between date of invoice, physical export of goods and obtaining shipping bill. Hence GSTR 1 filing may get delayed till shipping details are obtained.

Dealers who are 100% exporters will be required to obtain duty paid inputs and then claim refund based on exports. This leads to unnecessary blocking of working capital. Separate refund granting authorities and separate refund applications for SGST and CGST/IGST refunds is not a good practice under GST. The interest rate for delayed payments by assessee is at 18% while for delays by tax authorities the applicable rate is 6%.

Since BRC is mandatory for claiming refunds on ITC accumulated due to exports the entire process gets delayed as payment is done at a later date subsequent to export. 

(Views expressed are strictly personal)