Tax Exemptions for Exporters under GST | H&R Block | Blog
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Extension of Tax Exemptions for Exporters under GST

You must be familiar with the happiness that fills us up when we read the word ‘Sale’ or ‘Discount’ when we go out shopping and often end up getting more stuff, which may not be necessary, in our pre-planned budget. Well, yes, no one can say no to a little money saving. The same happiness fills us up, as a taxpayer, when we realise that we can save a little tax due to the tax exemptions provided under certain conditions. The 26th GST Council Meeting that was held on 10th March 2018, had some good news in store for the exporters, giving them a reason to rejoice.

Council Recommendations

The GST council sent out a strong signal of positivity as it decided to extend the tax exemptions that are available on the imported goods for another six months post 31st March 2018. Hence, the exporters that are currently availing different promotion schemes related to exports can continue availing the exemptions on their imports till 1st October 2018. The e-wallet scheme has also been announced to be implemented by the said date so that exporters can continue to enjoy the benefits in the future.

The exporters were facing liquidity issues ever since GST was rolled out as there was a constant delay in refunds of the taxes that they would pay at the time of shipping. Along with that, the extension in filing the returns for the first two months had made the matter worse as that meant a further delay in the exporters’ refund. The export industry has also stated that if the refunds were not released by November, the total working capital would be stuck. It was then decided that the exemption to exporters in paying taxes would make them more competitive and tax efficient in the international market boosting the prospects of exports in return.

This exemption is however not available to exporters who have been prosecuted for any offence under GST and the amount of tax evasion is Rs 2.5 crore.

What is the Solution?

The interim solution of re-introducing of pre-GST tax exemptions on imports, where paying tax at the time of imports wasn’t required, came into effect after it was noticed at the 22nd council meeting held on 6th October 2017, that the exporters were facing difficulties of blockage of cash because of having to pay GST and IGST on raw materials, inputs, imported finished goods, etc. Therefore, the persons holding AA, EPCG and EOUs would not have to pay IGST, Cess etc on imports. Also, a special scheme of paying 0.1% as GST on the procured goods was introduced for merchant exporters. The merchant exporters were also allowed to obtain the refund of the payment of 0.1% tax on export of goods. Additionally, domestic procurement that was made under the EPCG, EOU and Advance Authorization schemes were to be recognised as ‘deemed exports’ with the flexibility allowing either the suppliers or exporters to claim the refund of IGST or GST payment. The council had made all these avenues available till 31st March 2018.

Furthermore, some specified banks and public-sector units were allowed to import gold without paying IGST which were to be then supplied to exporters according to a scheme similar to Advance Authorization.

This time around the Council came out with a permanent solution of introducing the e-Wallet scheme with effect from 1st April 2018. The scheme is simply a creation of electronic wallet which will be credited with notional or virtual currency by the DGFT (Directorate General of Foreign Trade). Like a running account, money will be debited from the e-Wallet when the duty paid supplies are to be undertaken and the amount will be credited when the proof of export is presented.

H&R Block’s GST Managed Services is a one-stop solution to all your GST related woes. From filing your GST returns to claiming the refunds on your behalf, our tax experts will take up your burden and provide you with a tailored service designed for you keeping your requirements in mind.

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Niteesh Singh
Niteesh Singh
Niteesh is a Tax Researcher and Content Lead at H&R Block (India). He holds an MBA with a specialisation in BFSI domain. In his career spanning over six years, he has helped thousands of people understand taxes in a simple and effective manner. Outside work, Niteesh is an astronomy geek who is also involved in wildlife conservation activities.