Goods and Services Tax – GST – By: – CS SANJAY MALHOTRA – Dated:- 7-9-2016 Last Replied Date:- 14-9-2016 – Goods and Service Tax – Impact on Foreign Trade Policy Impact of Goods and Service Tax on Imports and Exports in India is the area which calls for review of various statutory compliances, IGST Rates, Export Benefits, Import Exemptions, Position of EOU in present Vs GST Regime, Supplies to SEZ/STPI/Mega Power Projects/Projects under ICB (International Competitive Bidding)…… Industry at large needs to review the Impact of GST on Imports from Working Capital perspective, Input / Capital Cost of Imports, Decision making, Imports Vs Indigenous sourcing…….. In the present Indirect Tax structure, Central Taxes are refunded by either the office of Ministry of Finance or Ministry of Commerce, but the provisions under Model GST law seems to involve State also if the existing benefits under FTP 2015-20 continued, which has been discussed below in detail. Ministry of Commerce should
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yment of Duty payments against E.O. Defaults in Chapter 4 and 5 of FTP 2015-20 No Provision exists in the Model GST Law-2016 (Section 35) for the utilisation of Duty Scrip for the payment of GST in case of Indigenous sourcing or Imports or E.O. Defaults. The same should be reviewed and suitably incorporated in GST Law as one of the Mode of Payment of GST as in the absence of same, financial outflow will increase and the Duty Credit Scrip remain unutilised or accumulated with the Exporter. However as the Basic Custom Duty is out of GST, the Duty Scrip can be utilised towards payment of Basic Custom Duty, but nevertheless issue remains for payment of IGST in case of Imports or Indigenous sourcing. CENVAT Credit admissibility on Utilisation of Duty Credit Scrip Duty Credit Scrip utilised for payment of Excise Duty / Service tax is eligible for CENVAT Credit in the present Excise Law / FTP 2015-20 (Para 3.15 of FTP), whereas NOTHING has been specifically provided in Section 35, Section 16
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digenous sourcing against Import Licences with Invalidation letter??? All the above needs to be considered and incorporated in GST Model Law so as to have continuity in business operations. Exempted Supplies to EOU/STPI/Mega Power Projects against Concessional Certificates At present Supplies to EOU/STPI/Mega Power Projects/World Bank Funded Projects / Projects under ICB are exempted from Central Taxes against CT-3/CT-1/Certificates from State Govt. or by way of Refund of Terminal Excise Duty / Duty Drawback. All supplies as stated above are subject to Tax in GST regime. In case of supplies to EOU, Refund of GST may be claimed either by the Supplier of goods or Recipient subject to some conditions. Nothing has been specified for supplies to STPI/Mega Power Projects / World Bank funded Projects as to the payment of GST and refund of same. In absence of clarity, these supplies would attract GST which adds to cost of product and may impact on sourcing from within India thus defeating the
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on of Free Foreign Currency. IGST will be substituted for CVD (Countervailing Duty) and SAD (Special Additional Duty). At present the CVD and SAD put together accounts for tax rate of nearly 17%, whereas GST rates may be 18-22%. Change in GST Rates may impact Export Obligation also. For e.g. in case of sourcing under Zero Duty EPCG Scheme, in majority of cases CVD (12.50%) and SAD (4%) thus put together amounts to 17% considering cascading impact. If IGST rates prevail around 20-22%, the same would also add to increase in Export Obligation and Importer may not have his business strategy to Import under Import schemes. In GST Regime, Imports of Inputs / Capital Goods should be exempted ab-initio from IGST or else the exemption of Basic Custom Duty and payment of IGST in cash would result in increased outflow of Working Capital thus leading to Increase in Transaction Cost. The above is to be taken on priority by MOF and MOC so that the Importers Cash flow should not be impacted and furth
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