The Many Ways GST Has Impacted Exports and Imports

India is a rapid growing economy and has gained its own stature globally. The global importance has paved way to substantial increase in imports and exports. It is particularly watchful on international trade as it augments the economic growth. Execution of the new tax regime is disruptive to most of the sectors and has its impacts widespread. GST implementation majorly resolved to create common national market, this in turn would alter the business structure in India. Enforcement of GST has modified the computation of custom duty and has brought about notable impacts on the import-export of goods.Import and export can be in both goods or services. Under GST, supply of goods and services are deemed as “Inter-state trade or commerce”. The tax levied on the act of supplying goods and services in the course of Inter-state trade or commerce is referred as “Integrated Goods and Services Tax”. And hence, the provisions are relevant for all imports and exports.IMPACT ON EXPORTSThe present scheme demands that importing raw materials and machinery can be made without applicable duties. The schemes are pertinent to “ab-initio” exemption or subsequent refund duties. The current GST system recommends that all duties must be paid at the time of transaction mandatorily, while refund  can be reaped after exports, as per section 38 of proposed Central GST Act, 2016 . The supplier is permitted to export without levying any tax. But  CGST, SGST and IGST credits discharged on inputs and input services can be availed.Here, the exporter has to gather money for manufacturing, inputs, payment of duties and taxes. GST causes blockage of working capital, as there is a provision of no exemption and only refund, resulting in blockage of about 185,500 crore annually. But without compromising on the rectitude of GST model, the working capital issues can be resolved. Tax payment transactions related to export should be allowed through e-currency. This would be identical to IOU, where it is permitted to set off with actual payment within a year or after execution of exports, whichever is earlier.To sum it all, exports are regarded as “zero rated supply”, while Input Tax Credit (ITC) is allowed and likewise the same is made available as refund to the exporters. IMPACT ON IMPORTS:The prevalence of tax will follow the principle, and tax revenue at instance of SGST will flow to state where the imported goods and services are usually consumed. GST paid on import of goods and services, full and complete set-off 14 15 is made available. Imports under GST are subjected to the imposition of IGST. Here imports attract basic customs duty pertaining to IGST.The trader importing goods and services are permitted to equilibrize IGST paid on imports against output liability. However, the credit of IGST is allowed but the credit of BCD is not available under the proposed law. GST embraces Special Additional Duty (SAD) and Countervailing Duty (CVD). Basic customs duty is not included and charged pursuant to the current law.  CVD is imposed on the valuation of transactions resulting in restructuring the working capital. The tax discharged is available as credit and pay back SAD is allowed. After performing certain compliance's, no restrictions are laid down under the new regime.  
Kranthi Tilak Reddy
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The Many Ways GST Has Impacted Exports and Imports

Kranthi Tilak Reddy
Blog
17th Jul, 2017
The Many Ways GST Has Impacted Exports and Imports

India is a rapid growing economy and has gained its own stature globally. The global importance has paved way to substantial increase in imports and exports. It is particularly watchful on international trade as it augments the economic growth. Execution of the new tax regime is disruptive to most of the sectors and has its impacts widespread. GST implementation majorly resolved to create common national market, this in turn would alter the business structure in India. Enforcement of GST has modified the computation of custom duty and has brought about notable impacts on the import-export of goods.

Import and export can be in both goods or services. Under GST, supply of goods and services are deemed as “Inter-state trade or commerce”. The tax levied on the act of supplying goods and services in the course of Inter-state trade or commerce is referred as “Integrated Goods and Services Tax”. And hence, the provisions are relevant for all imports and exports.

IMPACT ON EXPORTS

The present scheme demands that importing raw materials and machinery can be made without applicable duties. The schemes are pertinent to “ab-initio” exemption or subsequent refund duties. The current GST system recommends that all duties must be paid at the time of transaction mandatorily, while refund  can be reaped after exports, as per section 38 of proposed Central GST Act, 2016 . The supplier is permitted to export without levying any tax. But  CGST, SGST and IGST credits discharged on inputs and input services can be availed.

Here, the exporter has to gather money for manufacturing, inputs, payment of duties and taxes. GST causes blockage of working capital, as there is a provision of no exemption and only refund, resulting in blockage of about 185,500 crore annually. But without compromising on the rectitude of GST model, the working capital issues can be resolved. Tax payment transactions related to export should be allowed through e-currency. This would be identical to IOU, where it is permitted to set off with actual payment within a year or after execution of exports, whichever is earlier.

To sum it all, exports are regarded as “zero rated supply”, while Input Tax Credit (ITC) is allowed and likewise the same is made available as refund to the exporters.

IMPACT ON IMPORTS:

The prevalence of tax will follow the principle, and tax revenue at instance of SGST will flow to state where the imported goods and services are usually consumed. GST paid on import of goods and services, full and complete set-off 14 15 is made available. Imports under GST are subjected to the imposition of IGST. Here imports attract basic customs duty pertaining to IGST.

The trader importing goods and services are permitted to equilibrize IGST paid on imports against output liability. However, the credit of IGST is allowed but the credit of BCD is not available under the proposed law. GST embraces Special Additional Duty (SAD) and Countervailing Duty (CVD). Basic customs duty is not included and charged pursuant to the current law.  CVD is imposed on the valuation of transactions resulting in restructuring the working capital. The tax discharged is available as credit and pay back SAD is allowed. After performing certain compliance's, no restrictions are laid down under the new regime.  

Kranthi
Blog Author

Kranthi Tilak Reddy is one of the co founders and COO of White Matter Advisory services P Ltd. He is an Engineering graduate from SRM University and has done his Masters in finance.Being a true go-getter and an optimist to the core he has grown up the ranks in banking industry at an astonishing rate, his last stint being Associate Director, Business Clients -South with Standard Chartered Bank. With over 10 years of association with SME businesses and clients he certainly brings rich vein of expertise to the WMA table but more importantly his alluring passion towards great and customer service” the foundation on which he asserts WMA has been built.

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