Virtual payment system instead of an e-wallet for tax refunds: GST council

export.jpg

Instead of an e-wallet facility — a virtual payment system — for manufacture-exporters to get tax refunds in the upcoming Goods and Services Tax (GST) regime, the GST Council has agreed to process the refunds much quicker than earlier promised.

The council had earlier said 90% of the tax credits (refunds) will be paid in 30 days after shipment and the balance 10% (which are scrutinised) in 180 days.

Instead of an e-wallet facility — a virtual payment system — for manufacture-exporters to get tax refunds in the upcoming Goods and Services Tax (GST) regime, the GST Council has agreed to process the refunds much quicker than earlier promised.  “They (the GST Council) have not agreed to the idea of an e-wallet for exporters but have assured us that tax refunds would be arranged in a maximum of seven days after the shipments instead of about 12-18 months now,” an official source said.

The council had earlier said 90% of the tax credits (refunds) will be paid in 30 days after shipment and the balance 10% (which are scrutinised) in 180 days. Exporters have been sceptical of this, given that VAT refunds currently take much longer in practice. There were concerns that exporters’ working capital would get blocked due to
delayed refunds.

In the GST regime, a pay-first-and-get-refund system is preferred over tax exemption because an uninterrupted chain of value addition with tax at each stage is integral to the proposed tax on consumption.The DGFT had raised concerns that the provision for no-exemption-and-only-refund would lead to a blockage of about R1,85,000 crore annually for manufactured goods exporters.

For manufacturing a product, a firm buys locally or imports raw material and machinery. The current export schemes allow firms to buy these without payment of applicable duties through ab-initio exemption or subsequent refund of duties.

The GST system mandates that all duties must be paid at the time of a transaction while refund for these can be obtained after exports.

The GST Council which comprises of the central and state governments is committed to the principle that exports should be tax-free. It reckons that exporters should be made to pay taxes at the time of a transaction so that the GST chain is intact.

“One of the state finance ministers was of the opinion that even if the money is blocked, it would be for just one year. After that the process would be smooth,” the official said.

On Thursday, the council approved the remaining two of the five Bills related to the tax regime. GST, likely to be rolled out by July 1, will replace nearly a dozen central and state levies into a single national sales tax.

Source: http://www.financialexpress.com/economy/gst-council-meet-no-e-wallets-for-exporters-but-tax-refunds-in-7-days/596233/

Share this post

Leave a Reply

Your email address will not be published.

Solve this and then Post comment * Time limit is exhausted. Please reload CAPTCHA.

scroll to top