Tax refunds under GST may hurt exports: FIEO

Exports by MSME sector will be affected

The tax refund mechanism after GST rollout may reduce India’s export competitiveness to the tune of 2% per year if government does not bear the cost, premier exporters body Federation of Indian Export Organisations (FIEO) said on Thursday.

Exports by micro and small sectors will be hurt the most, it said. In the new indirect tax regime, exporters have to pay GST upfront for importing inputs for their exports as opposed to the current regime where exemption certificates issued by the state does the work.

“GST as its spin off effect would benefit both manufacturing and export sectors. The quick refund as against delayed refund of VAT will also help the export sector. However, we are worried with the liquidity issue as the refund mechanism would require payment of GST first and its refund later,” apex export body FIEO President G K Gupta told reporters here.

He said the additional cost of credit to manage the liquidity should be borne by the government, if present exemption is not brought forward in the GST. “On the rough estimate, the export sector would be losing export competitiveness by about 2% and the same needs to be off-setted to the export sector,” he said.

He said while FIEO welcomed the refund rules envisaging issuance of acknowledgement within three days of filing of claim and issuance of 90% of the claim within seven days, unfortunately contrary to the general belief, the interest on delayed payment would be due only after 60 days.

“This will give jolt to exporters particularly in micro and small sectors. FIEO, therefore, requests the government to provide interest on delayed refund after 10 days instead of 60,” Gupta said.

Sugar, tea, coffee to be a lot more cheaper under GST regime
Sugar, tea and coffee (other than instant coffee) and milk powder will be cheaper after GST rollout, the government said on Thursday. “Proposed GST Tax rates would be much lesser than the prevailing incidence of taxes in case of sugar, tea and coffee (other than instant coffee) and milk powder,” the finance ministry said.
Sugar attracts specific central excise duty of Rs 71 per quintal plus sugar cess of Rs 124 per quintal, which translates to ad valorem rate of more than 6%.

Including incidence on account of account of CST, octroi, and entry tax, the present total tax incidence would work out to more than 8%. As against this, the proposed GST rate on sugar is only 5%. This is 3% less than present incidence of taxes, the ministry clarified in a statement.

Tea and coffee (other than instant coffee) attract nil central excise duty and VAT rate of 5%.