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  3. Commerce Ministry to modify certain portions of FTP to ensure smooth roll out of GST

Commerce Ministry to modify certain portions of FTP to ensure smooth roll out of GST

02 May 2017 Evaluate

In order to align foreign trade policy (FTP) with the Goods and Services tax (GST), which is to be rolled out from July 1, the commerce ministry will modify certain portions of the policy. The ministry also proposes to come out with the mid-year review of FTP, a few months ahead of the schedule, before the GST rollout. The ministry was expected to complete the review by September but as the GST roll-out is scheduled from July 1, they have to make changes in it and also prepone the completion of review.

For the GST, the ministry may have to make changes in chapters relating to incentives for exporters; duty exemption schemes; export promotion capital goods scheme and deemed exports. As there is no provision of ab-initio exemption in the GST, exporters would have to pay the duties and then seek the refund. Currently, exporters are exempted from paying taxes. But under the GST regime, they have to pay the duties and then seek refunds. As per estimates, over Rs 1.85 lakh crore working capital of exporters may get stuck annually with the government under the GST. Blocking of this amount would push up the manufacturing cost of exporters as they have to borrow more from banks.

Earlier, the commerce ministry had pressed the GST Council to keep exports out of the framework of the new indirect tax regime and levy lower taxes on labour-intensive sectors like leather, cement and plantation. Refund of taxes takes about six to eight months and hence it is necessary to give an ab-intio exemption to exporters. Meanwhile, the 5-year foreign trade policy (2015-20) provides a framework for boosting exports of goods and services besides creation of employment and increasing value addition.

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