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Exporters will continue to get certain duty refunds as incentives after the Goods and Services Tax is implemented. The GST Council has framed the draft laws to ensure that the export sector doesn’t suffer when the new regime is rolled out, likely from July 1.
The GST legislation approved by the cabinet and the GST Council has a provision enabling duty drawback in relation to goods manufactured in the Country and exported. It’s been defined as rebate of duty or tax chargeable on imported and domestic inputs or input services used in the manufacture of these goods.
This would be an optional window that would aid sectors such as handicrafts, where artisans are not registered with the tax department. It will especially help exporters who have paid tax on inputs to make products that have no tax against which these duties could have been adjusted. The drawbacks are offered as incentives to ensure Indian goods do not become uncompetitive in foreign markets.
Exporters had been worried about the transition to the GST regime, which allows minimal upfront exemptions. The Commerce Department had represented to the Council as well as the Union Finance Ministry that the benefits enjoyed by exporters should be continued.
“This is a very positive move and benefits all those that do not claim input tax credit,” said Ajay Sahai, Director General of the Federation of Indian Export Organisations in New Delhi. Many exporters in the small and medium enterprise sector will benefit.
“Drawback is one of the most popular export incentive schemes wherein the exporters typically get a percentage of exports as refund from the Government, without too much of paperwork,” said Pratik Jain, Indirect tax leader at PwC India.
“Under GST, drawback for basic customs duty was expected to continue in any case but now it seems that it might include GST as well. If it does, as an optional scheme of refund, industry will welcome it.”
India’s merchandise exports registered double-digit growth in February 2017 for the first time since the new Government took office in May 2014. The surge was led by a 47% rise in engineering goods on the back of improved global demand.
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