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Commerce and Industry Ministry pressed the GST Council to keep exports out of the GST framework and levy lower taxes on labour-intensive sectors like leather, cement and plantation.
In their contention before the all powerful GST Council, the Ministry officials argued the need for granting an “ab-initio” exemption from Goods and Services Tax (GST) for exporters saying that the process of seeking tax refunds erodes their working capital.
Moreover, they stated that in view of tough global situation it is imperative to encourage exports.
Commerce and Industry Minister Nirmala Sitharaman said refund of taxes takes about six to eight months and hence it is necessary to “give an ab-intio exemption”.
She asked the council to treat exporters in such a way that they do not have to pay taxes upfront. “…it (GST) should not become a newer liability in the heads of exporter…we do not want the exporter to suffer twice,” she said.
She also underlined the need for encouraging labour intensive sectors like cement, leather and plantation crops and suggested that either they should be completely exempted from the new tax or be taxed at a low rate.
For leather industry, she said, “We wanted to ensure that if they can be given a complete exclusion from taxation because they have to generate lot of employment.”
“If at all, you have to have a taxation, keep them at the lowest possible, which means five per cent or less than that. So that is the strong pitch we made. India has a great potential in this particular sector,” she added.
On cement, she said that taxation at the moment in this sector is “very very high”. “If you calculate the central excise, VAT and other, the calculation is somewhere between 25 to 30 percent…Cement may end up 18 percent or more in GST regime which means it will be well above the revenue neutral rate,” she said.
Sectors like tea and coffee, 90 percent of the product is exported by India and it is net foreign exchange earner and the sector “should be given all the support rather than tax it”.
Talking about SEZs, she said transfer of goods from one zone to another in different States should be exempted from GST.
The Commerce Minister said that the Ministry asked the Council to differentiate between exports of goods and services in the GST. She pressed that taxing of certain service export areas like tourism, travel, health will have to be kept at the lowest slab. “This sector should be treated favourably in the GST regime,” she added.
When asked about the Commerce Ministry’s view on reducing gold import duty, Sitharaman said: “I have been talking about cutting the duty because it is a very critical raw material for the gems and jewellery sector”. This is also a labour intensive sector, earns lot of forex and employs lakhs of people. Further, she informed that Europe has removed gems and jewellery sector from the Generalized System of Preferences (GSP) list.
Under GSP, Europe offers duty incentives from origin to destination countries. GSP is withdrawan from a sector after it reaches a certain portion of trade, she said adding “the sector got excluded from GSP because of their extra ordinary performance.”
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