GST: No exemptions to exporters, but tax refunds in 7 days

21 Mar 2017


The GST Council has proposed a virtual payment system, which will ensure refunds to manufacturer exporters in seven days under the upcoming GST refime, although the council decided against an e-wallet facility.

The council had earlier said 90 per cent of the tax credits (refunds) will be paid in 30 days after shipment and the balance 10 per cent (which are scrutinised) in 180 days. It has agreed to process the refunds much quicker than earlier promised.

''They (the GST Council) have not agreed to the idea of an e-wallet for exporters but have assured us that tax refunds would be arranged in a maximum of seven days after the shipments instead of about 12-18 months now,'' reports quoting official sources said.

Exporters have been sceptical of this, given that VAT refunds currently take much longer in practice. There were concerns that exporters' working capital would get blocked due to delayed refunds.

The GST regime follows a pay-first-and-get-refund later system rather than tax exemptions so as to ensure an uninterrupted chain of value addition with tax at each stage of consumption.

The DGFT had raised concerns that the provision for no-exemption-and-only-refund would lead to a blockage of about Rs1,85,000 crore annually for manufactured goods exporters.

While current export schemes allow manufacturer-exporters to buy locally or import machinery and raw material without payment of applicable duties through ab-initio exemption or subsequent refund of duties, the GST system requires all duties to be paid at the time of a transaction while refund for these can be obtained after exports.

While agreeing to the principle that exports should be tax-free, the GST Council feels that exporters should also be made to pay taxes at the time of a transaction so that the GST chain runs smoothly.

''One of the state finance ministers was of the opinion that even if the money is blocked, it would be for just one year. After that the process would be smooth,'' the official said.

The GST Council has now finalised five bills related to the GST regime, which is likely to be rolled out by 1 July, replacing nearly a dozen central and state levies with a single national sales tax.

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