Free Press Journal

Indore: New tax regime will make export costlier

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Indore: The central government is poised to increase foreign exchange revenue by enhancing exports in the competitive world market. But the new indirect tax regime seems to fail the objective as the provisions in GST are proving to block the working capital of exporters, which will definitely make exports costlier in the world market.

Amid the bliss of new indirect tax regime, there are certain sectors which are supposed to get pain from it and export is one of them.
There are about 550 exporters in Madhya Pradesh who export goods to around 50 countries.

Some of the exporters explained how the new tax regime will bring negative impact on their business. In previous tax regime, if an export purchases any item or goods from vendor or supplier registered with Central Excise, they did not have to pay tax. Following the export of goods, by showing bill of lading they get form CT-1 from the customs department and submit it the vendor.


In case of goods purchased from non-Central Excise registered vendor or supplier, the exporter get form-H from Commercial Tax Department (CTD) on submission of Bill of Lading to it. Exporters have to give that H-form only to supplier or vendor. In other words they purchase without tax paid goods and as proof of exports, following the exports they submit the form CT-1 or H to suppliers.

However, in new tax regime, an exporter has to pay full tax first and subsequently would be eligible for duty draw back. Though provisions are being made to address this problem, finance ministry has introduced a fast-track process for the refund of taxes and duties to exporters. 90 percent of the duties will be refunded within seven days. The remaining refund of 10 percent will be made after the verification of accounts by tax authorities.

GST clearly provides that taxes must be paid and refunds will be provided. Since the regime is so structured, in order to ensure that there is a minimum pain to exporters, duty refunds will be provided within a week’s time.

Exporters do accepts that GST will mitigate the cascading effect of the multiple taxes under the previous system. The facility of input tax credit will be available to exporters even in the case of state taxes (SGST), which is not available previously. In totality exports will remain in zero GST rate zone.

Due to a higher rate of tax under the GST, exporters might face a cash crunch due to the blockage of working capital and also further enhance interest load on the capital. Hence, they have expressed the need for an exemption mechanism instead of first paying tax and then claiming a refund.

The cascading effect of blockage of working capital will further add in the cost of exports and making it costlier in the price competitive world market. Unnecessary documentation procedure will further be added with exporters.

Definitely GST have better results, which has put the nation under ‘One tax, One Nation’ regime and given signal to the world for a strong tax structure. But the government should also take care of the interest of exporters like in the previous regime. Instead of levying tax, some bond should be place for giving relief from blockage of working capital.

– Yogendra Rathor
Director, Gayatri Global Pvt Ltd

In GST also export is being put in zero tax category. Various measures including the input tax credit and a readjustment of the duty drawback scheme are being placed there, that would ensure that exports do not suffer under the new indirect tax regime. As far was fear of blockage of working capital is concerned, FIEO is having talks with finance ministry about it.

– Suber Rampurawala
Convener, (MP-CG) Federation of Indian Exporters’ Organisation (FIEO)