GST has been a game changer till now. It has brought under a common umbrella all the scattered localized taxes. Most of the indirect taxes have been subsumed, thereby eradicating double taxation incidences. Exports have been made zero rated, most of the articles of basic mass consumption have been made NIL rated. However, the system is yet to come up with business friendly solutions in few areas. One such area is the export of services. For example, under the new GST regime, for even a Re. 1 export of service, a bond has to be filed. While small businesses are already struggling with the plethora of rules and compliances (primarily due to lack of awareness), this move seems to set them 10 feet backward.
Why the Government needs to revisit these provisions – A “Not so Digital” India yet!
- As a direct consequence of the above rules, small scale service providers like bloggers, freelancers, etc are impacted adversely.
- The forms have not been notified online.So, a lot now has become dependent on manual processes and physical offices. Whereas the local jurisdictional offices themselves do not have clarity with respect to the practical implementation of rules.
- There is still considerable confusion the definition of “Exports” in certain specific concepts. For example, in the case of bloggers.Receipt of foreign exchange is one of the main conditions that are to be considered while determining “experts”. So what will happen in the case of bloggers or freelancers who receive payments from gateways, like PayPal? By the standard process, PayPal converts the foreign exchange Indian Rupees once it receives the money. So if the freelancer receives the money post conversion in Indian currency directly, will it still be considered exports? A lot of interpretations and tests would come to play here. So, if PayPal converts the money outside India, in that case, services can’t be treated as exports since no foreign currency was received in India. The thing is there is no sure shot to know where the conversion took place. Customers do have an option to request PayPal to issued Foreign Inward Remittance Certificate (FIRC). However, how many people even know of FIRC?
- There is complete chaos in the ecosystem with respect to awareness about export rules.Layman has been crippled with the dependency on professionals whereas even professionals need a minimum reasonable time to update themselves with the practical implementation of these provisions and their operational aspects. By the time a safe conclusion is reached, the deadline is coming knocking down.
- “Exporters are reluctant to export as getting a certificate from the GST authorities only adds to the transaction time and cost,” said FIEO in a representation to the finance ministry. The exporters have also been advised to do their own calculation, even while claiming a higher drawback as they have to forego IGST refund/ITC refund/carry forward of CENVAT credit. Also, there is still no clarity on whether IGST on exports should be paid in FOB or cost and freight.
In all, it can be said that a grand feast is being served under an open roof on a rainy day. With a platform and framework which is still so raw, pressurizing exporters hardly seem to be a prudent move. Bigger companies/service providers are getting an exemption from the cost intrinsic and voluminous documentation whereas small business is clearly at a disadvantage here. It is highly recommended that the Govt revisits the provisions and devise practically feasible ways to implement the same.
Until the said objective is fulfilled, it is our earnest appeal that the Government comes forward with suitable alternatives in support of small scale exporters. A turnover threshold can be devised wherein service providers beneath that level are exempted from this requirement. The requirement of bond can be done away with or replaced with Letter of Undertaking only.
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