As per Afzal Malbarwala, President of ACAAI, “It will definitely affect our and exporters’ business. Cash flow will be the biggest hurdle. Every exporter has to make huge investments after the pandemic, since all importers are asking for credit to keep up business and compete with other countries. On top of it, this rule will seriously affect exports. The government wants to promote exports and has launched a new NLP which was accepted by all and is now a big blow.
Anywhere in the world, there is no GST on exports and related goods. If there is no GST on sea freight, which is not even a third of the cost of airfreight; why is there on airfreight?
There is no GST on air imports, but there is a 5% GST on sea imports. We request the government to seriously reconsider the decision and charge GST @ 0%, which happens worldwide for sea and air.”
J Krishnan, former President of ACAAI and Board of Advisors, stated, “The exemption notification on air freight has not been extended. This notification was valid till September 30, and the trade had been expecting a further extension of this exemption for several years. With effect from October 1st, there will be an additional 18% GST payable in advance on export freight with the option of input credit.
This will put a strain on exporters’ working cash flow, which is still recovering from the pandemic downturn and a lack of significant international demand for traditional export products. While the Commerce Ministry wants every district to identify and promote at least one product for export, the elimination of this exemption will offer financial challenges, particularly for the SME segment, since many of them are cottage industry based or fall below the threshold limits. Even for GST-registered businesses, this raises compliance costs because full input credit is permitted, which does not generate additional revenue for the government but would increase the compliance cost to the taxpayers.
Internationally, all export-related charges are zero-rated, but in India, they are taxed, which raises the logistics cost, which is already the highest in the world, and will raise the cost even more. “