For the long-term growth of Indian exporters, it is imperative that those rules be avoided if outcomes of their implementation are predictable and negative.

Steven Philip Warner | November 2017 Issue | The Dollar Business


Good governance is not solely defined by the good faith of the affected (populace) in those masterminding the rules of society. The faith must be reciprocated with rules as well-based and nonvolatile. There was something imperfect with the GST rule that was brought into practice starting July. For exporters especially. Somehow, the government’s decision, originally meant to 'reconstruct' rules governing taxation appeared an unnecessary act of 'deconstruction' to improve the tax environment in the nation. And for exporters, the philosophy (of a simplified, improved tax regime) seemed to be flowing back into the “complex”, “troublesome” toxic pond that the GST was originally formulated to drain. So troubles followed.

In three months, troubles ballooned to an extent that the GST Council was forced to recommend strategies to undo the short-term damage done (by GST). As a recent CBEC note stated, the GST Council had become “Mindful of the difficulties faced by exporters post-GST leading to a decline in export performance and export competitiveness…" and that “…suitable strategies for helping this sector” had to be implemented. Now wait! “Helping”? There’s no point 'glorifying' corrections. Here’s what the CBEC release further states: “The Council was unanimous that it is in the national interest to take all possible measures to support the exporting community...” Again, support?! So what really was the relief and support?

One, to release the “held-up refund of IGST paid on goods exported outside India in July”. [That’s a delayed refund of about three months already!] Two, to “extend” the Advance Authorization (AA), EPCG and 100% EOU schemes to sourcing inputs from foreign or domestic suppliers, as well as treat domestic supplies to AA/EPCG holders and EOUs as “deemed exports”. There is nothing that is either an “absolute relief or incentive” in this regard. Let me quote an instance here. Prior to the introduction of GST, import of capital goods under EPCG authorisation was exempt of BCD, CVD and SAD, and the EO could be fulfilled either by physical or deemed exports. Now, even after the GST rules have been amended significantly, while IGST and Cess elements are relaxed under EPCG imports. But that's only under a strict condition that EO is not met through deemed exports. Can you sense the strings attached?

For Indian exporters, experience with the GST regime has made them feel like a gazelle encountering a super-built lion; and when faced with a circumstance as such, going limp for life can at times be the best option. At least there’s survival. A few revisions in GST have been noteworthy though. Merchant exporters being subject to a nominal GST of 0.1% for domestic sourcing for exports, GST on sale-purchase of MEIS/SEIS scrips being reduced to nil, exemption granted to exporters from furnishing Bond and Bank Guarantees during goods clearance in exports, introduction of the e-Wallet, etc., are good initiatives. For the long term growth of Indian exporters however, it's imperative that those rules be avoided if outcomes of their implementation are predictable and negative. By making rules for the sake of a change and then going back to change them as rapidly means we will be denying India’s exporters that much needed shot at victory. A business group that brings enough pride to the nation, doesn't deserve to go down empty-handed.