Quicker refunds helping exporters in GST regime

Since the introduction of the Goods and Services Tax (GST) five years back, the exporters have benefitted through quicker refunds but a few issues remain.

In the pre-GST regime, getting rebate on the excise duty paid on the export product involved submission of many documents and effective liaison with the officers empowered to grant refunds. That entailed costs and delays. Under the GST regime, the Integrated GST (IGST) paid on the export product is refunded quickly and automatically through the Electronic Data Interchange (EDI) system. This has greatly helped reduce the working capital requirements of exporters.

For refund of unutilised input tax credit (ITC) on account of exports without payment of GST, the documentation and formula have been prescribed clearly. The exporters have to file the application and upload the documents electronically and then the jurisdictional authorities grant the refund. The process involves costs, but in general, the refunds are granted quickly, unlike the pre-GST regime when getting refund of unutilised credit involved heavy costs and unreasonable delays.

However, a new restriction is that in the event of non-realisation or short realisation of export proceeds, the proportionate refund amounts have to be surrendered. The restriction regarding non-availability of exemption or refund of GST at the input stage for getting the refund of IGST paid on export goods is more stringent than earlier. The refund of unutilised ITC is incorrectly restricted on the basis of FOB value of exports by many field formations. Also, the mindset of some officials at the ground level creates unexpected difficulties for the exporters, for example, by insisting that the exporter must choose one rule over the other when the exporter has an option.  

When GST was introduced, the imports by export-oriented units (EOU), by developers and units in Special Economic Zones (SEZ) and under advance authorisations and Export Promotion Capital Goods (EPCG) authorisations attracted IGST. Later, exemptions from IGST were granted under these schemes but some irrational restrictions like ‘pre-import’ condition were imposed. The ‘pre-import’ condition has been withdrawn subsequently but with prospective effect. For the intervening period, several exporters are facing demands for violation of ‘pre-import’ condition. The Gujarat High Court had struck down the ‘pre-import’ conditions as ultra vires the advance authorisation scheme in the case of Maxim Tubes Company Pvt. Ltd. [2019(368) ELT 337 (Guj.)]. On appeal, the matter is pending before the Supreme Court.

After initial confusion, the high seas sales, in-bond sales and merchanting trade are being treated as neither supplies of goods nor supplies of services.  However, the representations of the parties supplying to merchant exporters at 0.1 per cent GST, that they should not be held liable for payment of full GST if the merchant exporter does not export the goods, have not yet received the attention of the government.  The imposition of IGST on ocean freight when imports are made on CIF basis was always a bad idea but the government fought till the Supreme Court struck down the levy in the case of Mohit Minerals Pvt. Ltd. [2022-TIOL-49-SC-GST-LB] and also held that the recommendations of the GST Council are not binding on the law makers.

Overall, the five years of GST have made life easier for exporters and importers, despite some rude shocks and unresolved issues. Hopefully, the few remaining issues will be sorted out soon enough.

Email: tncrajagopalan@gmail.com