Tax on Purchases by EOU's – Additional Working Capital required to pay GST on Inputs
By: – CASeetharaman KC
Goods and Services Tax – GST
Dated:- 8-7-2017<\/p>\n
The provisions of Section 16 of the IGST Act provides for the zero rated taxation of inputs supplied to SEZ Units whereas EOU's have been left out. The impact of such exclusion would be immense especially on the Cash flow of such units apart from the huge interest burdens on these units thereby creating a situation where their products would not be competitive to meet the challenges of the international markets.
\nFurther Section 54 of the CGST Act, which lays down provisions relating to “Refunds”, specifies that 90 % of amount claimed would be paid immediately. When we look<\/p>\n
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Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n ipment credits already being enjoyed by such units from their bankers. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n increase in the production levels or performance levels. = = = = = = = =<\/p>\n Plain text (Extract) only<\/strong> = = = = = = = =<\/p>\n","protected":false},"excerpt":{"rendered":" Tax on Purchases by EOU's – Additional Working Capital required to pay GST on InputsBy: – CASeetharaman KCGoods and Services Tax – GSTDated:- 8-7-2017 The provisions of Section 16 of the IGST Act provides for the zero rated taxation of inputs supplied to SEZ Units whereas EOU's have been left out. The impact of such … Continue reading “Tax on Purchases by EOU's – Additional Working Capital required to pay GST on Inputs”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-5916","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/5916","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=5916"}],"version-history":[{"count":0,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=\/wp\/v2\/posts\/5916\/revisions"}],"wp:attachment":[{"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=5916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=5916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/goodsandservicetax.in\/GST\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=5916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
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\nA simple example of an EOU doing an export of 180 crores per annum undertaking the activity of receiving and polishing Granite slabs and exporting would bring forth a situation where there is an additional cash outlay by the unit to the tune of nearly 10 crores per quarter. Assuming that the lead time from the date of purchase, processing and export and finally claiming refund would be 90 days, the EOU would have to look for funds for payment of taxes on inputs purchased over the period of 90 days.
\nA figurative display of the taxes which would to be funded by the EOU is as given below:
\nEOU Cash Flow and Interest burden after GST
\nExample : Export of Finished Granites\n<\/p>\n
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\nMoreover, the policy that taxes should not be exported maybe accomplished by charging zero rate of tax on exports but the fact that extra taxation payments and interest thereon needs to be made to the tune of 9.56 crores (which is nearly 7 per cent of the total input cost) on inputs actually adds up to the export price of such units thus making them uncompetitive in the World market.
\n It is obvious that this disparity would create a lot of opportunities for countries like China where exporters are being given a lot of benefits to compete in the international markets.
\nIt would be a great relief to such EOU's if the Government takes immediate steps to mitigate this anomaly being face<\/p>\n
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