In light of the World Commerce Organization’s (WTO) prediction of a steep decrease in global trade in 2019, Indian exporters have urged the government to reinstate the 18per cent goods and services tax (GST) exemption on export freight and expand the rupee payment mechanism to more nations.
Exporters will have to pay GST on exported ocean freight when the exemption expires on September 30, which traders think will negatively affect international shipments and aggravate liquidity issues. The Federation of Indian Export Organizations (FIEO) met with Commerce Minister Piyush Goyal on Friday, and during the discussion they stated that “the non-extension of notification relating to GST exemption on freight for exports has produced uncertainty, adding to the liquidity concerns of exporters.”
Exporters said overseas freight has jumped 300–350per cent from pre-COVID levels and, despite the marginal correction in rates of late, it is still 200–250per cent more than the 2019 levels. Due to exporters’ ability to request a refund after completing the payment, GST on export freight is revenue-neutral. According to FIEO, exporters would pay a price for the government’s increased liquidity as a result of the elimination of the exemption. An exemption will enable the export sector to have better liquidity, which is urgently needed given the extremely high cost of financing for exporters.
The commerce and industry ministry noted the robust growth experienced in some regions, including those in Latin America and Africa, but warned that the industry needed to be vigilant and upbeat to take advantage of growth prospects in these new markets. Industry participants were given the assurance that the government is dedicated to resolving their concerns. To improve export growth in this fiscal year, Minister Goyal urged the industry to adopt creative marketing strategies, raise quality standards, and fully utilise free trade agreements.
Exporters encouraged the Center to develop an export refinance program in response to tightening global financial conditions, arguing that interest rates in several rival nations are far lower.
According to FIEO, the increase in the repo rate has an impact on the banks’ base rates and, as a result, the lending rates for export credit.
“SBI’s base rate was 8.7per cent, and it’s expected to rise to 9.4per cent after the repo rate is raised. Many banks’ base rates will be significantly higher than SBI’s base rate, pushing the export credit rate in rupees. The government acknowledged the industry’s worries about the rising cost of raw materials and pledged to take the exporters’ requests into consideration.
