Pharmexcil seeks assistance from Commerce Ministry in resolving export issues post GST

The Dollar Business Bureau 

In order to resolve the difficulties that the pharma exporters are facing with the implementation of Goods and Services Tax (GST), Pharmaceuticals Export Promotion Council of India (Pharmexcil) has asked for the assistance of the Ministry of Commerce and Industry.

It has to be noted here that the Government had withdrawn incentives provided to pharmaceutical exporters under GST.

Pharmexcil, in a letter written to Commerce Secretary Rita Teaotia, stated that various categories of pharmaceuticals exporters specifically manufacturer-exporters and merchant exporters have to pay GST at various stages and then they can claim for refund, which results in blocking of working capital. Because due to this, the competitive advantage of exporters would be tapered off.

The Council has sought exemption of GST for the merchant exporters who are buying goods from manufacturers. Currently, they have to pay 18% GST while purchasing goods and then claim for refunds.

Raghuveer Kini, Executive Director, Pharmexcil, said that the merchant exports account for around 75% of India’s exports and the exporters work on very thin margin. Before the implementation of GST, purchase of goods by merchant exporters were carried out by filing B1 Bond (for clearance of excisable goods, without payment of Excise Duty) with the central excise authorities and the CT1 form was issued against every shipment for the payable value of excise duty and the manufacturer would issue the goods without paying such excise duty under the ARE1 form.

“Thus the merchant exporter had to pay only for the cost of goods and nothing else by way of taxes. Proof of Export was submitted as per the guidelines to complete the export process,” he added.

“However, post-GST, there is a provision for issuing of bond/letter of undertaking (LUT) for exporters but no exemption from GST at the time of purchasing goods from the manufacturer. This provision has become a major impediment for merchant exporters, as it entails blocking up of their already limited working capital,” Kini said.

“With an aim to ensure that our working capital remains unblocked so that we have a competitive advantage in pharma export, we are looking for an exemption from payment of GST at the time of purchase from the manufacturers either by way of bond or similar provisions as prevalent prior to GST implementation,” he said.

The pharma exporters are also demanding from the Government to withdraw GST from export cargo freight by the airlines. However, the government has exempted GST on import cargo.