Complex GST-related regulations spook EOU, SEZ exporters.

Businesses set up in Export oriented Units (EOUs) and Special Economic Zone (SEZ) continue to grapple with an array of rules and regulations related to GST even 10 months after the indirect tax system kicked in.

Amongst the various suggestions provided by the industry, Vinay Sharma, Chairman of the Export Promotion Council for EOUs & SEZs (EPCES) today said that one of them was to link the IT backbone GST Network (GSTN) with the National Securities Depository Ltd (NSDL) portal for smooth facilitation of the tax refunds.

NSDL e-Gov is a GST Suvidha Provider (GSP) appointed by GSTN for implementing GST across the country.

Exporters have claimed that over 60 percent of their refunds are stuck with the government complaining that delay in GST refund has blocked their working capital. The government has sanctioned refunds to exporters to the tune of Rs 17,616 crore till March, 2018.

SEZs and EOUs are special schemes under ministry of commerce, as a part of the government’s export promotion strategy and total exports from these two regions amounted to Rs 5.98 lakh crore in 2016-17.

SEZ is a special demarcated area, subjected to regulations that differ from the rest of the country, mainly to make it favorable for foreign direct investment. Such an area is deemed to be considered outside the customs territory.

Sharma also said that the industry was concerned was about the option for SEZ claiming tax refund charged by suppliers.

Currently, a supplier can provide goods and services to units in SEZ under Legal Undertaking (LUT) or export under bond without paying Integrated GST (IGST). Otherwise, they can pay tax and claim the refund later.

While expressing his concerns to a panel comprising key policy makers, Sharma, said that many suppliers do not want to opt for an LUT or the refund process and levying tax in their invoice adds on to the cost burden for an SEZ.

However, under GST-related laws, there is no option for an SEZ unit to claim the refund of the same.

The industry has also sought to treat SEZ as outside India (deemed foreign territory) for ‘place of supply rule’ under IGST for export of services.

Place of supply of goods rules suggests whether the transaction will be counted as intra-state or inter-state. The levy of State GST (SGST), Central GST (CGST) and IGST will be determined accordingly GST is a destination-based tax.