Liquidity relief on the way for exporters

New Delhi: The Goods and Services Tax (GST) Council headed by Finance Minister Piyush Goyal will shortly put together duty drawback measures for exporters to allow remission of countervailing duties and state levies.

The council, expected to meet next Friday or Saturday, will provide a foolproof duty drawback mechanism on par with the regime available before GST became operative, on July 1, 2017.

The Directorate General of Foreign Trade (DGFT) last week flagged liquidity woes faced by exporters with the finance ministry. The DGFT also pointed to the urgency, citing trade related issues with the US and competitive emerging market conditions, of remedial measures.

Under the new GST regime, exporters have been allowed remission on the basic customs duty but other duties and imposts are yet to be covered.

As part of an exercise to put together the new Foreign Trade Policy (FTP), Commerce and Industry Minister Suresh Prabhu, DGFT Director General Alok Chaturvedi and top Commerce Ministry officials had met exporters last week.

While the new FTP is in the works, the DGFT urged the Finance Ministry officials not to wait for the new policy rollout to extend remission on all duties hitherto uncovered under GST.

“The new duty drawback mechanism that would be pushed for before the GST Council will effectively resolve the working capital issues for exporters faced in the last ten months” said a top Commerce Ministry official, who did not wish to be identified.

In the interim budget presented by Goyal, customs duty collections up for the next fiscal have been estimated at Rs 1.45 lakh crore. Revised estimates have put the customs collections at Rs 1.30 lakh crore in 2018-19 as against the initial estimates of Rs 1.15 lakh crore.

Out of the total customs collections, a whopping 30 per cent could be owing to countervailing duties and multiple cess levied to compensate states.

Further, over a dozen duties and taxes levied by states got subsumed under the GST regime while exporters were not compensated.

The GST Council will also finalise the innovative e-wallet scheme for exporters that was in the making for sometime. When it becomes operative, liquid funds of exporters will not get blocked.

Under e-wallet, the DGFT will credit notional or virtual currency into accounts against payment of GST, IGST and various levies paid under the single impost regime.

E-wallet announced in April 2018 missed the October 1 deadline pending clearance by the Finance Ministry and the GST Council. The council’s meeting will be the last before the general elections are notified and the election code kicks in.