Exporters fear liquidity hit after GST exemption ends

New Delhi, Oct 6, 2022

The government’s move to withdraw the GST exemption on export freight at the start of the month has made exporters nervous as they expect liquidity to shrink at a time when they are dealing with weak demand in advanced countries, prompting them to seek a relook.

From October 1, GST on ocean freight will have to be paid at 5%, while exports by air billed to customers in India attracts 18% levy.
While officials have argued that there was no need to extend the benefit, given that the refund process has become easier, exporters argued that it can take up to three months, if not more, to get the money back. Theprocess is not completed until the returns are filed and the deadline for filing is by 20th of every month for transactions in the previous month. With interest rates rising and payment cycles from overseas buyers getting longer, exporters said, there was a need for additional liquidity. “The recessionary trends have led to tough competition from other countries in international market. . . International buyers have already started delaying accepting orders. Thus, inventory cost in holding export consignments in India is also increasing,” said Apparel Export Promotion Council chairman Naren Goenka.

He and other exportershave argued that freight costs will rise. “Non-extension of notification has caused panic and uncertainty adding to the liquidity challenges of the exporters…overseas freights have gone up by 300-350% from pre-Covid level and though there is little correction in the freight rate recently, freights are still 200-250% more than 2019 level,” Fieo president A Sakthivel has said in a letter to FM Nirmala Sitharaman, while seeking an extension.

Tax practitioners too sought government intervention. “If exemption is not extended or alternatively ITC of IGST is not allowed, it may turn out to be death knell of Indian shipping lines and freight forwarders,” said tax lawyer RS Sharma.

[The Times of India]