India’s Exports Dip as Traders Await Tax Refunds Worth Crores
Traders in India say they are expecting tax refunds worth Rs 50,000 crore from the government.
Indian traders are anxious about exports taking a hit since they say they are short of operating capital, with the government owing them refunds worth Rs 50,000 crore. Four months after the biggest tax overhaul in the country, exports are expected to fall further in the coming months.
Signs have already begun to show as India’s exports went down for the first time in 15 months in October this year, dipping by 1.1 per cent to $23.1 billion, Bloomberg reported. The fall is despite government’s efforts to simplify the implementation of the Goods and Services Tax (GST) in the country. The rate at which trade deficit is increasing can hit exports badly. Trade deficit has widened the most in three years to $14 billion and may fall further this month if crude oil prices continue to go up.
“Our working capital is stuck, we’re losing revenues and now we’re having to let workers go,” A. Sakthivel, the regional chairman of the Federation of Indian Exporters Organization in southern India said, according to the report. He added many have lost their jobs, including over 10,000 workers who have been asked to leave Tirupur, the textile manufacturing town that employs half a million people in Tamil Nadu.
Traders feel that the GST may help the rest of the country, but it is not working out for them and it would help if exporters are not included in it.
Small, unorganized businesses like the textile and jewelry sectors have witnessed some of the worst disruptions in supply chain since July this year. Traders say that the flow of cash refunds is very slow and a majority of India’s export groups like gems and jewelry, pharmaceuticals, textiles have been hit by the crisis. The extended deadlines for tax filing and large-scale reviews that have tried to ease the rates for merchant exporters have not been able to ensure speedy cash refunds to the traders, hurting their business.
“Although exports are likely to stabilize after the GST-driven distortions subside, the traditional product mix will hinder the country’s ability to participate in the ongoing trade upturn,” Radhika Rao, a Singapore-based economist at DBS Bank, said, according to the report.
The issue has remained stagnant for three months or so, as the traders have not received their refunds for exports made in July, August, September and October. Another issue that might crop up is the accuracy of the refund amounts. Although the law states that there is zero rating of exports, the refund rules do not guarantee that an exporter is liable to get the refund equaling the amount of the GST paid by the traders.