GST: Right Intent. Wrong Rules

A catalyst or deterrent for India's exports?

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While the intent and direction of the Goods and Services Tax (GST) should, by all means, provide the Indian economy and exports the much-needed boost, exporters fear that the devil may be in the details and rightly so. The Foreign Trade Policy (FTP) 2015-2020 will have to undergo a number of changes to keep itself relevant in the GST regime. MEIS & SEIS rates are likely to be revised and exporters fear that the revision may be downwards. The refund mechanism with respect to Export Promotion Capital Goods (EPCG) Scheme and the Advance Authorisation Scheme, if not implemented well can tie-up an exporter’s cash flow in knots. Duty Drawback rates also need to be reworked to account for input tax credit. And with barely a month to go before GST is rolled out exporters are wary that rolling out a revised FTP, which addresses all these issues, may not be feasible. And if that is the case, GST may actually cause more harm than good to India’s exports.

Come July 1, 2017, and ex-actly 17 years after it was first mooted (by the then Vajpayee government), the nation will embrace what’s being touted as the most radical and progressive tax reform it has ever seen. Yes, we are talking about the Goods and Services Tax (GST) – the path-breaking tax reform conceptualised with the aim of bringing the whole of India under a single tax structure, through one unified tax mechanism, paving the way for the realisation of a unified common market across the country that also happens to be Asia’s third-largest economy.