GST is work in progress, Says experts

22 August, 2017

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The government has rolled out Goods and Services Tax (GST) but it remains work-in-progress and needs further refining to support ‘Make in India’ which is critical for promoting country’s manufacturing and exports, agreed industry experts who spoke at an Assocham event on Wednesday. 

Small enterprises have been hit by the GST provision that Rs 20 lakh exemption limit will not apply for the inter-state supply of goods and services, said Sumit Dutt Majumder, former chairman, central board of excise and customs (CBEC), adding this is not good for employment generation.

Majumder suggested amending this provision so that unregistered vendors could also supply goods and services to recipients in other states.

Besides, he said, there is a fear that exporters could avoid sourcing goods and services from small businesses outside the ambit of GST due to difficulty in getting input credit.

He also pointed out the contradiction between EU policy and the definition of exports in the GST. While the policy says any supply of goods and services to you will be deemed as exports, the GST does not allow this.

Citing these deficiencies, Majumder said, “We all must accept GST as work in progress.” He was speaking at Assocham’s conference with theme “Exports@Post GST: Gearing up for the New Era”.

Citing flaws in the existing GST provisions, Bimal Jain, director, A2Z Taxcorp, said in the pre-GST era, exporters were able to procure inputs without paying taxes but under GST all supplies have to be mandatorily taxed.

He also said that GST has put manufacturer exporters and merchant exporters at par, with both eligible to claim a refund of IGST unlike earlier when the credit of countervailing duty (CVD) was available to manufacturers only.

Jain said this is not the right taxation policy to promote Make in India.

He also pointed to the anomaly in the GST which allows zero rated export of goods to Nepal but does not extend the same treatment to services export.

Jain also cited that GST does not apply to a Korean agent of Indian exporters but an Indian agent of a foreign supplier will have to pay GST despite the fact that he earns valuable foreign exchange for the country. He said the Indian agent might not be able to pass on the tax burden to his foreign client, which would impact his earnings.