Centre to hasten GST refunds

Govt. virtually rejects exporters’ claims of $10 billion in funds getting blocked

September 22, 2017 09:28 pm | Updated 10:53 pm IST - New Delhi

A pedestrian walks past a poster advertising about the new goods and services tax (GST) regime at the Service Tax Office in Bangalore on June 29, 2017. 
India is bracing for its most significant reform in a generation as the world's fastest growing major economy is unified into a single market for the first time with the introduction of the Goods and Services Tax (GST) on July 1. / AFP PHOTO / MANJUNATH KIRAN

A pedestrian walks past a poster advertising about the new goods and services tax (GST) regime at the Service Tax Office in Bangalore on June 29, 2017. India is bracing for its most significant reform in a generation as the world's fastest growing major economy is unified into a single market for the first time with the introduction of the Goods and Services Tax (GST) on July 1. / AFP PHOTO / MANJUNATH KIRAN

The Centre on Friday termed as “wild estimates,” exporters claiming that working capital was getting blocked due to delay in Goods and Services Tax (GST) refunds. However, it was working out a mechanism to expedite the refund process.

“There are various figures also being discussed on the blockage of such (working capital) funds (post-GST), which are wild estimates.... (and) not based on facts,” an official statement said.

Duty drawback

Virtually rejecting claims by exporters that about $10 billion worth of funds is estimated to be a blocked (till December 2017) due to the delay in refunds, the Centre said in respect of 66% value of exports, exporters had preferred duty drawback scheme instead of taking actual refund of input taxes in the pre-GST regime.

On the mechanism for expediting refunds, it said, “We are trying to find a way of giving refund by linking form (GST Return) GSTR 1 with form GSTR 3B and, therefore, for the month of July, where form GSTR 1 is already filed, the authorities would be in a position to process the refund applications.” Therefore, the exporters, who have not yet filed form GSTR 1 for July 2017, have to file it immediately, the statement said.

“Allowing refund based on GSTR-3B and GSTR-1 submission will ease up working capital and business issues for exporters who have had their funds locked up,” said Archit Gupta, CEO, ClearTax.

The Centre said while the GSTN application for refund was getting ready, the Centre was in the process of finding other ways of giving refund, if necessary, through a manual procedure.

The Committee on Export, set up by the GST Council, has discussed various methods of resolving the issue of blockage of funds for the exporters, it said, adding that the panel would soon present the solution to their problems before the GST Council.

In the meantime, the State and Union government authorities have been asked to clear the pending refund claims of Central Excise and VAT for the pre-GST period so that exporters will get immediate relief.

Pointing out that the duty drawback scheme was extended in the post-GST regime for three months — upto September 30, 2017 —subject to exporters not taking input tax credit under GST, the Centre said “this means that as of now, for 66% of the value of exports, there is no blockage of funds.”

The remaining 33% of exporters always used to prefer a normal refund route for taxes paid on inputs for Central Excise separately and for VAT separately, it said. The refund was made available to them only after the actual exports took place and, for such class of exporters, earlier also there was a normal blockage of funds for a period of 5 – 6 months at least except for those using facility of advance authorisation, the Centre said. Hence, the problem is not as grievous as it is made out to be, it added

Ganesh Kumar Gupta, President, Federation of Indian Export Organisations (FIEO), said the projection of the refunds was made looking into the merchandise as well as the services export sectors. These figures were based on estimation of blocked refund from July to October, 2017, he added.

He, however, welcomed the Centre’s decision to allow refund to the export sector based on GSTR1 and 3B, as proposed by FIEO. He said expeditious settlement of refund claims of Central Excise as well as VAT will add to the liquidity flow of exporters.

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