Refund mechanism still a pain point for exporters

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Refunds getting stuck, a complex filing process and corruption in the refund process in small towns — these are some of the challenges that exporters say they are struggling with a year after the goods and services tax (GST) rollout. 

Most of the problems relate to the refund of input tax credit that have to be made by the states as well. Manual intervention in the refund process has added to the transaction time and cost of exporters, experts said. While the carpet industry says Rs 400 crore is stuck in GST refunds, textile exporters estimate at least 5% of their working capital is blocked. 

“An average exporter with a turnover of Rs 10 crore has at least Rs 50 lakh blocked with the government,” said Amit Goyal, managing director of Mumbaibased Sarju Garments. “Why was the new system imposed on us if the refund mechanism was not in place?” The tax department has cleared refunds above Rs 7,500 crore since May 31 when the special drive to clear those of exporters was launched.

For the textile sector, 5-10% of working capital being blocked alongside banks’ skepticism about lending to it is bad news. Earlier, banks used to advance some part of loans against the expected GST refund but that has stopped now, according to the companies.

Mahavir Pratap Sharma, chairman of Carpet Export Promotion Council, pointed to three sets of issues – getting refunds against letters of undertaking, delays in reverse-charge mechanism for job workers, and a mismatch in GST rates on inputs and the final products. “Human interference is a problem and corruption in small towns slows things down,” Sharma said. “Contrary to the government’s promise of 90% refunds in seven days, it still takes at least a month.

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