GST India, designed specifically keeping in mind the transportation of goods, is a blanket tax regime, implemented across the nation, impacting almost everything related to the operations of goods and services. Although, GST is a favorable move for national transporters of goods and services, however, it might burst the bubble for international exporters.
Federation of Indian Export Organizations(FIEO) on Friday, said “Goods and Services Tax (GST) will severely dent the liquidity situation of traders and, the compliance cost of merchant exporters may go up” according to the apex body, export competitiveness of domestic players may fall by about 2%, pertaining to liquidity problems.
Prior to GST, exporters used to avail exemptions from tax duties. However, Post GST, they now have to first pay the GST sum and then subsequently seek refund. Due to this refund mechanism, FIEO stated that working capital of about 1.85 lakh rupees, of exporters might get stuck with the government. The blocking of this amount would push up the manufacturing cost of exporters as they have to borrow more from banks.
Although it is difficult to say whether the exports under the new tax regime would suffer or not, but it is proclaimed that it will take at least 5-6 months, in order to adjust to the new regime as there would be teething troubles primarily.