GST: Liquidity crisis, interest burden will impact SME exporters

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Saurabh Gupta | 26 May, 2017
Exporters' body Federation of Indian Export Organisations (FIEO) Thursday said that under the proposed Goods and Services Tax (GST), the liquidity crisis plus the cost of interest will be the major issues before SME exporters.

"However FIEO welcomes GST, but we are worried with the liquidity issue as the refund mechanism would require payment of GST first and its refund subsequently. 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 a rough estimate, export sector would be losing export competitiveness by about 2% and the same needs to be off-setted to the export sector. This will impact SMEs more," FIEO President G K Gupta told reporters in New Delhi.

In his address, Gupta said, "The export sector welcomes the introduction of GST as its spin off effect would benefit both the manufacturing and export sector. The logistics cost is expected to come down to help the exim sector. The quick refund, as against delayed refund of VAT, will also help the export sector."

He also said that exporters welcome the final Refund Rules envisaging issuance of acknowledgment within 3 days of the filing of claim and issuance of 90 percent of the claim amount on provisional basis within 7 days, unfortunately contrary to general belief, the interest on delayed payment would be due only after 60 days. "This will give a jolt to exporters particularly in micro & small sector. FIEO, therefore, request the Government to provide interest on delayed refund after 10 days (3 days + 7 days) instead of 60 days," he added.

FIEO also suggested that exporters be allowed to pay GST on transactions through e-currency.

The review of Foreign Trade Policy 2015-20 is due on 1st October, 2017. Gupta said, "Since GST will be rolled out from 1st of July, 2017, FIEO has requested the Ministry of Commerce to prepone the announcement so as to coincide with the rolling out of GST. We are grateful to the Hon'ble Minister for agreeing to our request."

"We also request the Government to sensitize the trade & industry that the imports duty benefit on imports under the existing instruments would only continue till the date of introduction of GST. All existing instruments will have to follow the discipline of the GST Act and the Rules from 1.7.2017," he added.

FIEO has analysed India's exports in relation to Global imports at HS 6 digit level. It used the data for the years 2006, 2011 and 2016. FIEO focused on the Top 200 lines of world imports. These lines account for 58 percent of world imports and 50 percent of India's global exports. Data shows that India's top product basket is broadly in sync with global basket.

FIEO Director General Ajay Sahay told media that though world trade is increasing, India's exports are not growing at that pace. He said, "Our share in these 200 products is presently at 1.43 percent and an increase of share by 0.5 percent can add to over USD 80 billion in country's exports."

India's global share in top 200 products is only 1.43 percent and 1.62 percent in all products. "We need to focus on exports of top 200 teriff lines," added Sahay.