Agri exporters likely to get incentives as part of the FTP review

The Dollar Business Bureau

With the GST regime just around the corner, agri exporters have raised concerns to the Commerce Ministry regarding their working capital issues.  The government had announced doubling the tax on fertilisers to 12% under the GST regime, which is likely to hit both the farmers, the manufacturers and the exporters.

Presently fertilisers attract an excise duty of 1% with a value added tax upto 5%. Ironically natural gas the key raw material in the making of urea has been kept out of the GST ambit. And fertiliser companies cannot claim input tax credit on finished goods as natural gas is out of the GST purview. This could lead to a cascading effect as natural gas which usually attracts a VAT of 15% takes up almost 75% of the production cost.

Keeping this in view the commerce ministry could provide incentives such as enhanced interest subsidy to agri commodity exporters to boost exports.

These incentives could be announced as a part of the FTP review a Commerce ministry official spokesperson revealed.

Lending support to the demands of the agri commodity exporters, the Director General of Federation of Indian Export Organisations, Ajay Sahai said that the cost of business would go up for exporters under GST, as exporters have to pay the duties first and refunds would come later. This will lead to working capital, well over Rs 1.85 lakh crore stuck with the government. Presently exporters get exemptions ab-initio. Suggesting that the government should look at mechanisms to reduce the cost of business, Sahai said, ‘The ministry should look at increasing the interest subsidy and Merchandise Exports from India Scheme (MEIS) each by 2 per cent.’

Under MEIS, the government gives, 2%, 3% and 5% duty benefits to the exporters based upon the product and the country.

As part of the FTP review, the government is taking the views of all the stakeholders to provide support to certain sectors to boost exports.