Last week, Manmohan Singh, the former prime minister and noted economist, expressed worry on the economic situation. And, asked the government to engage with thinking minds to take it out of a man-made crisis. He mainly blamed demonetisation and hastily implemented Goods and Services Tax
(GST) for the current slowdown. Also saying India had not been able to increase its export to take advantage of the opportunities that have arisen in global trade due to geopolitical realignments.
Leaving aside the politically oriented parts of his statement and responses from the establishment, the fact is that a fall in export growth and private investment started a couple of years before demonetisation and introduction of GST.
Demonetisation and faulty implementation of GST
significantly worsened the situation. The government was busy painting a rosy picture of the economy before recently recognising ground realities and announcing a package of measures to revive the economy. The finance minister has promised more measures but exporters
continue to face many unexpected difficulties.
Those in Special Economic Zones are being asked to file bills of entry for transfer of duty credits to parties in the Domestic Tariff Area. On the ground that such scrips are goods coming under Classification 4907, attracting basic customs duty of 10 per cent. Input tax credit on this cannot be taken.
are being asked to pay GST
on a reverse charge basis on application fees, composition fees, etc, above what they pay to the government for authorisations or licences under various export promotion schemes or for regularisation of defaults. On the ground that such payments are for services provided by the government to business entities.
are also unable to make applications for shipping bills filed from July 1 onward under the Merchandise Exports from India Scheme. The Customs department has started enforcing bank guarantees furnished under the export promotion schemes for duty-free import of the inputs and capital goods required for export production, soon after expiry of the export obligation period. Many exporters are receiving demands from Customs in respect of bonds furnished in the ‘90s for duty-free import under export promotion schemes, without regard to the possibility that such old records might have been destroyed after obtaining the export obligation discharge certificates from competent authorities. Many requests of exporters for redemption of advance authorisations are held up at the regional offices of the Directorate General of Foreign Trade on technical grounds. Resulting in their getting placed in the ‘Denied Entities List’ and consequent denial of any further authorisations or duty credit scrips.
The finance minister has promised clearance of all pending GST refunds to micro, small and medium enterprises within 30 days. But, there is no reason to hold up the pending refund claims of other exporters.
The commerce ministry must examine whether it is better to let the Customs alone administer the export promotion schemes through exemption notifications. The Reserve Bank should examine if it is necessary to insist on realisation of export proceeds against every shipment, barring some exceptions. The aim should be to look at the overall costs the present procedures and restrictions impose on the entire economy. And, to revise or remove these if there is insufficient justification.
Hopefully, the government will take note and make life easier for exporters.