GST will have a MAJOR impact on your Exports and Imports – The upcoming GST will change the way we do businesses. It will also have a substantial impact on Exporters and Importers, and those who supply to Exporters. While GST will surely bring in some simplicity in the way we do duty optimization and calculations for exports and imports, it will come at a cost. The exporters may be in for a shock because of sudden impact on their working capital requirements and may have to queue up before the banks. Some confusions in the process of exports may be there in the beginning because of lack of clarity in say formats of LUT and Bonds, High sea sale provisions, etc. Yet, more confusions would be about duty credit scripts as there is no HSN code if the exporters want to transfer them.
In the ensuing paragraphs, an attempt is made to understand the impact under different situations from a layman’s perspective, without getting into the legal provisions and definitions.
In the GST structure, most of the exemptions that were hitherto there for various end uses would cease to exist. It is likely to be the case even for export related imports which presently enjoy exemption under various schemes of Foreign Trade policy and also in customs and excise provisions. As per GST law, imports into India would be deemed to be inter-state sales, and hence a duty equivalent to IGST on the item in India would be levied. This IGST would replace the current CVD and SAD on imports and would be available as input credit for all kinds of importers. Basic customs duty, Anti Dumping duty, etc.
Exports would be zero rated in entirety and all the GST on inputs would be refundable, unlike present system where some taxes like CST remain unadjusted and affect the cost of goods. While there would be no exemption on GST payable on the inputs, Exporters will get the refund of all the duties that will be levied on the inputs. They are also promised the facility of 90% refund of claims on provisional basis. However, the efficacy of this remains to be seen in the coming months.
The following table lists the impact to various Exporters and Importers:-
A couple of interesting points for imports and exports in the upcoming GST are:-
We will discuss the real impact with the exporters and importers in the coming weeks and will come back with the analysis.
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