The commerce department has flagged a series of concerns on the mechanism devised for goods and services tax (GST) and said it would not be beneficial for exporters.

To begin with, the biggest concern is related to the plan to let exporters pay the taxes and then get a refund after sending shipments. Sources said despite red flags going up, the revenue department has refused to change its stance or work out an alternative mechanism such as use of bank guarantees.

For someone who is buying raw material nine months to a year ahead of shipments, this will mean locking up substantial amount of working capital, which will push up the overall cost of goods that are exported.

In any case, the revenue department has done away with the current facility of using Exim scrips, which are instruments used to pay various levies like custom duty, excise duty and service tax by exporters. The scrips come by way of incentives. Not only has the revenue department decided to restrict the scrips to payment of only basic customs duty but also said they will attract Integrated Goods and Services Tax (IGST). Exporters said the scrips would lose 40-50% of the premium that they currently fetch as half of the scrips would be unutilised — a point that the commerce department shares.

In fact, the issue has been flagged at the highest level but the revenue department has not obliged despite the fact that scrips, whose value is estimated at around Rs 25,000 crore, are only a small fraction of the overall indirect tax kitty.

Source: Times of India