Needed, GST, not another alphabet soup–Economic Times

The Cabinet Committee on Economic Affairs (CCEA) approved last week a new Remission of Duties or Taxes on Export Products (RoDTEP) scheme that will reimburse central and state taxes, duties and cess on petroleum products and electricity and levies other than the goods and services tax (GST) that are embedded in the value of the export. This is in sync with the general rule that countries export goods and services, not taxes, but still convoluted. A far simpler way would be to subsume all indirect taxes under GST and to refund exporters all indirect tax payment as input tax credit.

Nevertheless, the government hopes that the new WTO-compliant scheme, which will replace the Merchandise Exports from India Scheme, will help boost exports that have been tepid. Exports grew for the first time in seven months by 2.9% to $37.5 billion in February but worries that a prolonged coronavirus contagion could hurt India’s trade and economy are not misplaced.

The best way to help exporters is to swiftly bring all indirect taxes under GST so that exporters who have paid taxes in the value chain ending in export would only have to claim a refund. It is more efficient than reimbursements under the new scheme that involves setting up a committee to fix the rates.

Refunds under the new scheme will be in the form of a transferable duty credit/electronic scrip to be issued to exporters.

VAT and other levies on fuel used in transportation, mandi tax, duty on electricity used during manufacturing and so on would be covered for reimbursement. Digitisation is fine, but there is no reason why electricity duty, mandi tax or any of the other levies targeted by RoDTEP should be kept out of GST. It breaks the GST chain and creates systemic inefficiencies that create large holes in the tax net.

This piece appeared as an editorial opinion in the print edition of The Economic Times.
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via Needed, GST, not another alphabet soup

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