Duty relaxation for exporters and a tax relief package for the real estate sector are likely to be discussed at the next meeting of the GST Council, which is expected to meet once before the model code of conduct kicks in ahead of the Lok Sabha elections.
Targeting the steady erosion of export competitiveness across segments, which is especially telling in labour intensive sectors such as textiles and garments, the Centre is readying a proposal for a duty drawback like scheme under the Goods and Services Tax (GST) regime that could comprehensively compensate exporters for embedded taxes.
Also, a ministerial panel set- up last month to analyse tax issues faced by the real estate sector under the GST regime is set to make a strong push for lower tax rates for under-construction residential properties and the affordable housing segment.
Currently, under the GST regime, compensation for taxes other than the basic customs duty (BCD) is not given to exporters, which ends up eroding their competitiveness. Officials involved in the exercise confirmed that the duty drawback scheme is being readied after a letter from the Directorate General of Foreign Trade (DGFT) to the Central Board of Indirect Taxes & Customs sought relief on this count.
After this, a proposal has been sent to the GST Policy Wing for a duty drawback like scheme under GST. GST officials are also discussing contours of the proposed e-wallet scheme for exporters, which was put on hold for six months until October last year.
“A scheme to provide more sops for exporters such as some relief on the front of additional levy is being worked on. It would be more clarificatory in nature aimed at freeing up the working capital of exporters,” said a government official, adding that the existing export incentive scheme Merchandise Export from India Scheme (MEIS) could be tweaked to give some more sops to exporters.
The Commerce Ministry has been pushing for more relief to exporters including the e-wallet scheme but the Finance Ministry has raised some concerns about the possible misuse by some fly-by-night exporters, said another official. An inter-ministerial meeting regarding the e-wallet scheme for exporters has been scheduled for next week.
The e-wallet scheme or electronic e-wallets will be credited with notional or virtual currency by the DGFT. This notional/virtual currency will be used by the exporters to make the GST/IGST payment on goods imported by them so their funds are not blocked.
The proposal was discussed in 26th GST Council meeting in March last year and since many technical, legal and administrative issues were identified, its implementation was put on hold.
“It will monitor the track record of the exporter and provide relief on taxes paid on inputs. Last time, the discussion stalled as there were concerns about the availment of credit and the exporter having an edge over others since his working capital will be free compared to other exporters,” an official said.
Meanwhile, the Group of Ministers (GoM), under Gujarat Deputy Chief Minister Nitin Patel, set up last month to analyse tax rates and challenges being faced by the real estate sector under the GST regime is leaning in favour of lower rates for under-construction residential properties.
The panel has favoured lowering the GST rate on under-construction residential properties to 5 per cent (without input tax credit) from the present rate of 12 per cent with input tax credit (after abatement of land) and for affordable housing to 3 per cent from the current rate of 8 per cent.