Exporters worry about a cash crisis after the GST exemption expires

Exporters are asking for reconsideration after the government’s decision to end the GST exemption on export freight at the beginning of the month left them anxious since they anticipate that liquidity would decrease at a time when they are struggling with sluggish demand in advanced nations.

From October 1, GST on ocean freight will be required to be paid at a rate of 5%, while exports via air invoiced to clients in India would be subject to an 18% charge.

Exporters claim that it can take up to three months if not longer, to get the money while officials contend that there is no need to prolong the benefit because the refund procedure has gotten simpler. The procedure isn’t finished until the returns are submitted, and for transactions from the previous month, the deadline for submission is the 20th of each month. Order acceptance has already started to be delayed due to increased interest rates and longer payment cycles from international purchasers. Thus, inventory costs for keeping export shipments in India are also rising, according to Naren Goenka, head of the Apparel Export Promotion Council.

He and other exporters have complained that freight costs would increase. “Non-extension of notification has resulted in panic and uncertainty, compounding the exporters’ cash issues… In a letter to FM Nirmala Sitharaman, Fieo president A Sakthivel stated that international freights had increased by 300–350% from pre–Covid levels.

Tax professionals also requested government assistance. “If the exemption is not extended or ITC of IGST is not permitted, it may prove to be the death knell of Indian shipping lines and freight forwarders,” said tax attorney RS Sharma.

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