Calcutta: Bengal finance minister Amit Mitra is worried that the unresolved glitches in the GST Network, which have sparked a vicious throwback to a pre-VAT situation where exporters are being forced to file manual returns to claim tax refunds, could severely undermine efforts to crank up exports that have already started to show signs of flagging.
"We have reverted to a primitive situation, going back to a time when exporters had to run around in circles and file a stack of documents to claim refunds. The GST network was supposed to work seamlessly. Unfortunately, it doesn't," Mitra told The Telegraph.
Mitra argues that when exporters are stymied for refunds, they are unable to operate at optimal levels because their working capital is stuck with the tax authorities.
"I have raised these concerns with the GST Council and the Centre. And I am not the only one who is saying that. Just take a look at what the Gujral committee report says," Mitra said.
In its recent report, the parliamentary standing committee under Naresh Gujral said: "Refunds have started to trickle only from the month of November, 2017. The intervening period of four months from July to October, 2017 has been extremely trying for the exporters. The significant time lag in providing refunds has supposedly eroded the competitiveness of exporters by around 1.2 per cent to 2 per cent."
The report goes on to add: "An estimated 15-20 per cent of the working capital is already stuck up with the government for refunds."
Mitra believes that there is a real risk that this could go up to 25 per cent - and that would exacerbate the torment for exporters.
"The warning flags have already been raised. There has been an overall decline in merchandise exports by 1.12 per cent from the year-ago level," says Mitra while debunking the notion that state tax authorities have anything to do with exporters' GST refund claims.
Mitra has been a passionate advocate of the GST regime but has been dismayed by the ham-handed manner in which the Centre has gone about implementing one of the biggest indirect tax reforms that the country has ever seen.
The Gujral report has been equally scathing in its criticism of the Centre and the GST authorities. In its report, the committee said "it hopes that the Department of Revenue will leave no stone unturned to expedite the process (of refunds). It also desires that semi-automatic system of refund of input tax credit may be replaced with completely automatic system with no human interface for claiming credit refunds."
Mitra has reason to be deeply worried. Exports from Bengal had risen by 10.49 per cent to $8.3 billion (Rs 52,875 crore) in 2016-17. The state has already set for itself a goal of achieving exports worth Rs 75,108 crore by 2019-20. Pearls and precious and semi-precious stones exports from the state were valued at $ 830.96 million in 2016-17, giving Bengal a 10 per cent share of the country's overall exports in this category. Iron and steel exports from the state clocked $ 825 million, also accounting for 10 per cent of the nation's exports in this segment.
"What we are really worried about is the knock-on impact that the slow pace of GST refunds can have on the gold and jewellery industry. It could precipitate massive job losses, especially in the case of contract labour," says Mitra.
