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BW Businessworld

Weakening Export Competitiveness

Ajay Sahai, Director General and CEO, Federation of Indian Export Organisations tells Mahua Venkatesh how delay in refunds is impacting India’s export competitiveness and what the government is doing to speed up refunds

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Edited excerpts:

The delay in refund payment to exporters post-GST has become a serious issue. What is the true picture?
The refund process has been slow owing to a number of factors including lack of understanding of new tax laws, technical glitches and even lack of handholding on part of tax authorities. Micro and small exporters have suffered the most. Many have refused new orders in the wake of liquidity crunch, and some have even reduced production, impacting jobs. The delay has also affected the competitiveness of exports; even in cases where some exporters have been able to manage funds, the same has come at a cost blunting the competitive edge of exports. Unfortunately, we are facing such challenges at a time when the global trade growth is robust and we should have been riding the wave.

What’s the estimated pending refund amount?
The industry and the government estimates vary. We feel that over 85 per cent of Input Tax Credit (ITC) applications and over 60 per cent of Integrated Goods and Service Tax (IGST) applications may be pending. But we are happy that the government is sensitive to the problems of exporters and has asked tax authorities to expedite the refund process. It has also issued clarifications with respect to many grey areas around the process.

The PMO has asked authorities to speed up refunds. What concrete steps are being taken in this regard?
Subsequent to the PMO meeting, the CBEC launched a fortnight clearance drive from 15-29 March to expedite the settlement of pending cases of IGST/ITC. We hope the state tax authorities too follow in the footsteps of the centre and organise similar drive at their level. Plus, many of the issues that were holding back the exporters from filing application, including the declaration regarding claiming drawback, prescribed documents for manual applications and refund formula to provide filing of ITC refund as per the relevant period have now been settled with the intervention of PMO.

Typically, refunds are always given with a lag. What is your comment?
Refund always comes with a time lag and we all understand that. But the time lag should be between procurement of inputs and exports of final goods. There are many cases where exports have taken place in July-August and exporters are still awaiting refund. When GST was announced, exporters were told they would receive 90 per cent of refund claims within seven days of applying. But the said time limit was not enforced. Fortunately though, the GST Council agreed to provide exemption from IGST/GST on imported/ domestic inputs used in the export product from October 2017 to March 2018. Recently, the facility was extended to 30 September, 2018. We feel that exemption from IGST on any input used in export product should be given on permanent basis to ensure a predictable environment. If the European Union, Australia, Canada, and Thailand among others have such mechanism, why not in India? Is the cost of credit in India lower than these countries? Is our refund system more efficient than these countries? If our competitors are providing exemption from VAT/GST on inputs required for export production to provide competitive edge to exports, why not us?