Nirmala Sitharaman: Exporters urge FM Nirmala Sitharaman to extend GST exemption on export freight
Members of the Federation of Indian Export Organizations (FIEO) have expressed concern that the exemption will not be extended, they said it would add to their liquidity problems amid rising interest rates. interest. The exemption has been extended twice since its introduction in 2018.
“Overseas freight rates had gone up 300-350% from pre-Covid levels. Now there’s been a slight drop in those rates, but they’re still 200-250% higher than in 2019”, declared the president of the FIEO. A Sakthivel said.
He also said that if the exemption is not renewed, exporters will be required to pay 18% GST on export freight, which will increase the logistics costs of Indian goods in the international market.
“Due to the recent increase in interest rates by the Reserve Bank of India, GST payments on such high freight cost will have a significant negative impact on the liquidity of exporters,” Sakthivel said. World trade “is entering a very difficult era as countries face high inflation”, with an “imminent recession impacting demand”, the FIEO president said.
“This is evident from the slowdown in India’s export growth rate between April and August. Indian exporters are doing their best despite the rupee being one of the most resilient currencies in the world, which does not offers no less competitiveness to our exports compared to our competitors. Most currencies have depreciated at a much faster rate,” Sakthivel said in his letter sent to the minister by email on October 2.
He pointed out that GST on export freight is “revenue neutral” because exporters will pay the same and then get a refund but with a 2-3 month lag, locking up their capital.
“This can increase government liquidity but at the expense of exporters. Since the cost of credit for exporters is very high, an exemption will help the sector maintain better liquidity, which is what is needed at the moment,” did he declare.
Sakthivel urged Sitharaman to make a quick decision for the exporting community, which is going through a difficult phase.
The FIEO had recently asked the RBI to introduce an export refinance scheme to protect export credit from rising interest rates.