Thursday, 4 January 2018

Parliamentary Committee's Report on 'exports' inter alia recommends dispensing with "rigmarole" of refund mechanism

Dept. Related Parliamentary Standing Committee on Commerce presents 139th report on ‘Impact of GST on Exports’, notes several operational issues making refund procedure tardy & cumbersome while stating that significant time lag in providing refunds has supposedly eroded the competitiveness of exporters by around 1.2% to 2%; Finding that refunds are being disallowed on slightest pretext, Committee states that due diligence cannot be overplayed and accordingly, recommends a formal grievance redressal mechanism for exporters and establishment of a dedicated office/unit for continuous interaction which shall act as a single window; Also finds that new Drawback and ROSL rates (post transition, w.e.f. October 1, 2017) are low and not realistic, they do not capture various blocked taxes that reduce the cost competitiveness of various labour-intensive industries and therefore, recommends that Finance Ministry extend the pre-GST Duty Drawback rates till June 30, 2018 or till such time the Dept. works out revised rates; Further recommends that Govt. should provide such rates which would encompass all taxes including GST / IGST as well as embedded / blocked taxes and give exporters option to claim either drawback or ITC; Committee strongly recommends permitting Duty Credit Scrips for payment of GST in domestic procurements and for payment of IGST on exports and imports, while keeping ‘high seas trade’ outside the purview of GST where goods are directly delivered to customers outside India; According to Committee, reverse charge mechanism may be removed on permanent basis for procurements made in relation to exports, and suggests no GST on job-work for exports with a criminal penalty to ensure such products don’t enter domestic market; GST on export freights through air, sea and railway may be exempted or rationalised and Govt. should revisit definition of “export of service” u/s 2(6) of IGST Act to ensure that HO-branch transactions are kept outside GST ambit; Further, location of ‘recipient of service’ be treated as ‘place of supply’ in case of ‘intermediary’ services so that benefit of export of service would be available, suggests the Committee;  Also feels that GSTN did not get enough time for testing and even training to officers on ground on issues like LUT and related matters has not been adequate; Questioning the need to put exporters to rigmarole of paying taxes and taking refund, Committee feels that “a system may be devised to ensure that the procurement / manufacture for export purpose may be exempted from taxation system” : Dept-Related Parliamentary Standing Committee on Commerce Report 

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