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The mid-term review of the Foreign Trade Policy (FTP) — likely next month — may provide relief to exporters reeling under the impact of the new Goods and Services Tax (GST) regime, with the Centre examining if some lost benefits could be restored.
The Commerce Ministry is in talks with the Finance Ministry and the GST Council to expand the scope of the popular ‘Advance Authorisation’ scheme to allow Integrated GST (IGST) exemption on imported inputs, in addition to basic customs duty, a government official told BusinessLine .
Changes are also likely to rules on supplies to export-oriented units (EOUs) from the domestic tariff area (DTA), which are currently not being treated as ‘deemed exports’.
“Exporters have been complaining that by restricting exemptions in the advance authorisation to only the basic customs duties on inputs, the scheme has become unattractive and that many may opt out if IGST is also not exempted,” the official said.
It is accepted international practice — in countries where GST and VAT exist — to give exemptions to exporters from such taxes on imported inputs, he added.
Under the GST regime, DTA manufacturers supplying to EOUs are not allowed to import the inputs without payment of duty under Advance Authorisation. “The DTA suppliers have to pay the basic customs duty, cesses and IGST for imported inputs. They are entitled to input tax credit of only IGST. Basic customs duty and cesses thereon are cost to them,” points out the Engineering Export Promotion Council.
The mid-term review of the FTP (2015-2020), likely next month, will try to sort out some of the problems faced by exporters if the GST Council gives its consent.
“There is nothing that the Commerce Ministry can do without the approval from the GST Council. It is being hoped that all issues being faced by exporters, which can be sorted out by the Centre, will get resolved in the review. If not, efforts in the direction would continue,” the official said.
India’s exports have been growing consistently for the past eleven months, but the pace of growth has slackened. Exports in 2016-17 grew 4.71 per cent to $274.64 billion compared with the previous fiscal, it was after two years of continuous decline.
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