New Delhi – It’s been a tough time for the exporters from the time the GST has been implemented. The online facility to claim refunds is yet to be rolled out. Hence the exporters are facing a lot of trouble with shortage of funds. As the working capital is stuck, the exporters have started postponing their shipments.
This is a cause of concern for the small and medium enterprise exporters who have a turnover of less than ₹ 20 crores. The working capital has shot up as there has been a delay in the refunds that are expected under the goods and services tax (GST).
With the new indirect tax regime not easy to handle, companies are having a lot of problem in making sure that their vendors also pay GST. Vilas Phule, who is the CFO at Magna Steyr India said that the refunds cannot be claimed presently as the facility is not yet operational on the goods and service tax network (GSTN). He also mentioned that now there are additional responsibilities, one being that their company pays GST on the procurement and the other one to keep a control and check as to if all the vendors are paying GST.
Jigar Doshi, who is a partner at SKP Business consulting said that it was unknown right now as to when the facility to claim the refunds would be available on the GSTN website. Hence the exporters who do not have deep pockets are having a tough time due to the working capital blockage.
Pritam Mahure, who is an expert in GST said that the exporters are facing a lot of challenges and also as the upfront exemption is not available it is only adding to their woes. He also mentioned that the government should form a committee to discuss this issue as this issue as the working capital blockage could be a negative sentiment for the economy and could thus derail the struggling exports in India.
In the Pre-GST era, the exporters had the provision of upfront tax exemption on the goods that they were exporting. But now in the post-GST time, the exporters are supposed to procure goods and services on payments of GST. This credit of GST will later be available to exporters as a refund. Also for the exporting, there are two methods applicable under the IGST. The first one being- export without GST with an undertaking or a Bond and the second one being – payment of the IGST and then claiming the refund later.
Mr. Phule said that their company had nearly 80% as exports and if the exemptions are allowed on a real time basis then no funds would be blocked, and it would also help in avoiding unnecessary administrative work of paying GST and then claiming refunds.
The former GSTN chairman, Mr. Navin Kumar, who retired recently said that the facility to claim the refunds was not available right now for the exporters but very soon there is going to be a separate form for them to claim their refunds on IGST.
Amar Kulkarni who is the CFO at Hoerbiger India was of the similar opinion and said that the working capital pressure has led to postponing the exports as the companies have been struggling for funds. He said that the entire process could be eased out if the upfront exemption is allowed.
Mr. Doshi said that before GST there was no requirement to obtain the letter of undertaking for exporting services, which now has been made mandatory under the GST. The government, he added, should identify the key challenges faced by the exporters and try to address these immediately.
The worst part is that the companies have to make sure that the vendors pay GST as then only the refund can be claimed. This is leading to a lot of hassles for the exporters. It is very difficult to make sure that the vendors comply and pay the GST. In case the vendor is not registered, the company would have to pay the GST and raise a payment voucher, which in itself is a tedious task.
Hoerbiger India was having a very difficult time as the company was being held responsible for all its vendors who did not comply. The company said that this was a bit unfair as the SME exporters do not have the man power to track and ensure all of these. To add to all the woes, the regular GSTN breakdowns have only increased the misery of the exporters.
Magna Steyr India said that the GST wasn’t ready and thus they were facing numerous errors in the system. The exporters overall have been very disappointed due to all these issues.
Anita Rastogi, who is a partner at PwC – GST and Indirect Tax said that the biggest issue today was the working capital requirement. There are a lot of procedural problems being faced by the exporters, and it is important that the government safeguards their interests on priority.