Quick Summary
Led by the Federation of Indian Export Organizations (FIEO), Indias worried exporters have written to Finance Minister Nirmala Sitharaman requesting an extension of the previously-granted exemption from the Goods and Services Tax (GST) on export freight. They claimed that failure to grant the extension will compound their liquidity challenges. Since its introduction in 2018, the government extended the exemption from GST on export freight twice. The most recent extension, which lasted for two
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FAQ :
Exporters are requesting an extension to avoid liquidity challenges, as the withdrawal of the exemption would require them to pay 18% GST on export ocean freight, increasing their costs.
The most recent extension of the GST exemption on export freight concluded on September 30, 2022.
Overseas freight rates have gone up by 300-350% from pre-COVID levels and are still 200-250% higher than in 2019.
Agriculture exports, particularly fruits and vegetables, are likely to be most affected, as the freight cost can sometimes exceed the FOB value of the exports.
FIEO argues that while the GST on export freight is technically revenue neutral as exporters can claim a refund, the process involves a time lag and requires significant upfront payment, impacting their immediate liquidity.
FIEO believes international trade is entering a difficult phase due to high inflation and the threat of recession in many countries, which is affecting global demand.
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