Under the GST regime, the remaining 10% duty refund will be made after verifications by tax authorities

Commerce and industry minister Nirmala Sitharaman. Photo: Pradeep Gaur/Mint

The finance ministry has agreed to refund 90% of the duties paid by exporters in the process of manufacturing items for export within a period of seven days under the Goods and Services Tax (GST) regime.

The issue was raised at a meeting of state industry ministers under the Trade Promotion and Development Council, chaired by commerce and industry minister Nirmala Sitharaman.

Commerce secretary Rita Teaotia told the state ministers that the revenue department has given an assurance that the revamped ICEGATE portal would make sure refunds are made on time. “If duty refunds could not be made within seven days, then government will pay interest to exporters. However, it is yet to be decided how much interest will be paid to exporters in such a scenario,” Teaotia said.

The ICEGATE portal provides e-filing services to trade and cargo carriers and other customs department clients.

The remaining 10% refund will be made after verifications by tax authorities.

The commerce secretary’s assurance satisfied exporters and the states.

The proposed GST regime mandates that all duties must be paid at the time of the transaction, while refunds can be obtained after exports.

For exporters, this could mean a working capital crunch as duties may get held up with tax authorities for months before a refund is processed.

Two schemes are especially likely to be impacted by the GST regime: the Advance Authorization Scheme (AAS) that allows duty-free sourcing of raw material and the Export Promotion Capital Goods (EPCG) scheme that allows duty-free sourcing of machinery for export purposes.

“GST clearly provides that taxes must be paid and refunds will be provided. So since the regime is so structured, in order to ensure that there is minimum pain to exporters, duty refunds will be provided within a week’s time,” Teaotia said.

Teaotia said the states also raised the issue of duties to be paid on transferring goods between units in two states.

“This issue has been raised by the commerce ministry before the GST Council on 3 January and we are looking forward to a favourable consideration,” she added.

The commerce ministry has sought exemption from inter-state GST on goods transferred from Special Economic Zones (SEZs) across states, arguing that since SEZs are treated as zones outside the country’s territory, they should not pay duties on transactions among them.

Sitharaman said the commerce ministry has designed a new scheme called Trade Infrastructure for Exports Scheme (TIES) that will come into operation from the next financial year to support states to build export infrastructure.

The scheme, contours of which are still to be finalized, will replace the ASIDE (Assistance to States for Infrastructure Development of Exports) scheme that was discontinued by the centre in 2015-16, when states’ share in net proceeds of union tax revenues was increased to 42% from 32%, in line with the 14th Finance Commission’s recommendations.

However, the states are yet to agree to expediting refunds.

S.C. Ralhan, president, Federation of Indian Export Organizations, said exporters require the support of the states so that exports do not face the liquidity problems under GST.

“The Merchant Exporters, who at present avail exemptions through various forms, may be given the same facility under GST. We have many meetings with the Central Government but they feel it will be possible only if the States agree to the same as exports are subject to IGST which has both Central GST and State GST component. The exemption from IGST on the final product procured for exports would help in easing the liquidity as cost of credit in India is much above the international benchmark,” he said.