Government seeks to clear way as exports trip on rules

NEW DELHI: The government has stepped in to try and resolve procedural confusion over customs norms under the goods and services tax regime that has seen exports worth millions of dollars remain stuck in factories. The government has issued one set of clarifications, but exporters say they still aren’t sure about things. The government reviewed the situation on Thursday and more clarifications are expected soon to get shipments moving again, an official said. GST took effect on July 1.

“Goods are stuck at the factory gate,” said Ajay Sahai, director-general of the Federation of Indian Export Organisations ( FIEO).

The problem relates largely to processes for exporters to claim credit for input taxes paid, the documents they have to furnish for the same, and the use of input tax credit to pay integrated GST (IGST) levied on exports.



Exporters have to furnish a bond or letter of undertaking (LUT) for customs officials to release export consignments. These documents are equivalent to a pledge that input taxes have been paid.

Little clarity at field level
Clearance of exports goods has got stuck as input tax credit is not available to pay IGST levied on exports and the procedure of exemption from IGST against bonds is not yet clear at the field level, said one exporter. It’s also not clear how exporters are to submit these bonds.

The government had allowed manual submission as electronic submission was not working smoothly, partly because of a change in format under GST.

To simplify matters, the government had allowed deputy and assistant commissioners to issue bonds, and not just commissioners, who are mostly located at a distance from exporters. Moreover, exporters are being asked to furnish separate bonds and LUTs for each consignment, which is leading to confusion and more

paperwork at both ends. “While some clarifications have been provided, it is not made clear which category of exporters will give LUT and who will give bond,” Sahai said.

Moreover, exporters now have to deal with state tax authorities who are not yet aware of export procedures and therefore not willing to endorse documents. There is also a lack of clarity over the value of currency in which the export invoice is to be made.

GST norms stipulate that foreign exchange conversions should be according to the Reserve Bank of India reference rate but the free on board (FOB) value of exports is based on the rupee value as per the exchange rate notified by customs department for drawback purposes. Exporters want this anomaly rectified.

They also want clarity on whether IGST on exports should be paid in FOB or cost and freight.

Even services exporters are facing roadblocks, previously not having had to submit any letters but now required to do so. “Exporters are reluctant to export as getting certificate from GST authorities only adds to transaction time and cost,” FIEO said in a representation to the finance ministry.