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FIEO asks finance ministry to take a look at ‘harsh’ provision in Budget for exporters

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NEW DELHI: The Federation of Indian Export Organisations (FIEO) criticised the tax department for making exporters open containers, branding them “risky” and holding up refunds which take anytime between six months to one year.

Complaining that around 2,000 exporters have been served notices by the Directorate of Revenue Intelligence (DRI) and GST investigation wing for import against Advance Authorization prior to exports citing wrongful claims of benefits, FIEO said that almost 80% of the exporters’ time goes in compliance that has impacted MSMEs the most.

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“With this, I feel that exporters probably are considered by the government as a drain on the economy…we find that the treatment meted out to exporters is rather sad and sorry,” said FIEO president Sharad K Saraf said Wednesday.

Referring to certain provisions brought in the Finance Bill, Saraf said they are “harsh and draconian” and have “serious” bearing on exports.

An amendment is proposed in Section 113of the Customs Act (which deals with confiscation of goods attempted to be improperly exported) as per which goods would be liable for confiscation if products entered for exportation under claim of remission or refund of any duty or tax or levy make a “wrongful claim”.

“The word ‘wrongful claim’ is subject to various interpretations and will put exporters at the mercy of field formations even if the remission rates are wrongly calculated or dispute about classification of the product under a particular rate arises,” Saraf said, asking for a relook the “harsh” provision.

Other FIEO officials termed this “Inspector Raj”.

“For the benefit of 2-4% (of exported goods) that may have been wrongfully claimed, the shipment is being confiscated. We must consider that if goods don’t reach buyers on time, the country’s image also takes a hit,” Saraf said.

Saraf also said the Finance Bill has amended the Section 16 of the IGST Act withdrawing the facility of exports on payment of Integrated Goods and Services Tax as originally envisaged in the law.

Till now, exporters have the option to ship either under bond/LUT (letter of undertaking) or on payment of IGST. Almost two-third of all exporters use the IGST method.

“If the IGST system was functioning seamlessly and was preferred option for the exporters, there was no need to dispense with such option,” he said, adding if there are any challenges faced by the tax authorities, it should be discussed so that an amicable solution is found rather than dropping an “excellent” facility extended to the exporters while entering the GST regime.

Most of the exporters were availing the IGST payment facility as the mechanism of refund was entirely seamless without any transaction cost, he claimed.

The apex body also said that there is no mechanism for dispute settlement in the Directorate General of Foreign Trade due to which exporters have to move court and the number of court cases are rising.

FIEO

Exports, GSP
India’s exports could rise to $340-350 billion in FY22 driven by an improved global economy but are likely to clock $285-290 billion in FY21, lower than $314.3 billion in FY20.

Exports this fiscal are likely to contract by about 7-8% to around $290 billion despite a much steeper decline in the initial months of the lockdown due to a recent improvement in the situation though the delayed announcement of rates and reduced allocations under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme is an impediment.

Exporters are hopeful that the rates for the 2,000 items that are included in the first part of the GK Pillai Committee on RoDTEP, would be announced by February 14 while the rest would be announced by February 28.

Commerce and industry minister Piyush Goyal is scheduled to meet exporters on Thursday to discuss the five-year Foreign Trade Policy to be announced on April 1.

Ajay Sahai, Director General, FIEO said the body will suggest schemes that are compatible with WTO norms, such as subsidies on R&D and remodelling the SEZ policy.

On the restoration of Generalised System of Preferences by the US, Sahai said that it would be acceptable if the benefits come back on a non-reciprocal basis but if there are conditions attached, then it needs to be considered.

“Let us not overplay GSP because we getting a benefit of only $200 million on exports of $40 billion,” he said.

The US had withdrawn the zero or low duty benefits to Indian exports in 2019.

EXPORTERS COMPLAIN
•Govt feels exporters drain on economy

•Sad, sorry treatment meted out to exporters

•Tax dept brands exporters as “risky”

•200 exporters claim clean termed “risky”

•DRI, GST probe wing sent notices to 2,000 exporters

•No mechanism for dispute settlement in DGFT

•80% time goes in compliance, MSMEs worst hit

•Budget provision of goods confiscation on wrongful claims “harsh”

•Flexibility to export on integrated tax payment withdrawal proposed

•No refund will happen without a cost attached: says FIEO

•Container shortage problem remains

•Stuck MEIS refunds hit liquidity

Exports scenario
•FY21 exports seen $285-290 bln

•FY22 goods exports $340-350 bln likely

•US GSP restoration should be non-reciprocal

•Exports to China up on farm, pharma, steel products

•GK Pillai panel may announce RoDTEP rates this month



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