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VAT provisions will hurt cash flow: exporters

By Our Special Correspondent

CHENNAI, JAN. 19. The Federation of Indian Export Organisations (FIEO) has opposed the provision for collection and refund of value-added tax (VAT), in lieu of exemption for exporters.

Most of the States have hardly enough funds and are unlikely to honour the obligation to refund the tax in three months as stipulated in the White Paper on VAT released by the Empowered Committee of State Finance Ministers, according to R.K. Dhawan, Chairman of the FIEO-northern region.

In a statement, he said the refund procedures would be cumbersome and time-taking, hampering cash flow for exporters. In Haryana, where VAT was already in force for a year, the exporters were still "struggling" to get refunds.

"A computerised VAT information system with data on both the taxes paid on inputs and the volume of exports is essential. Hence, unless EDI (electronic data interchange) connectivity is ensured, the tax exemption route should be available to exporters, allowing them to use the H Form instead of the usual C Form." When exemption was being given to units in special economic zones (SEZs) and 100 per cent export-oriented units, there was no justification to deny the facility to other exporters, Dr. Dhawan said.

The Southern India Chamber of Commerce and Industry (SICCI), welcoming "wholeheartedly" many features proposed in the White Paper, suggested a re-examination of the exclusion of octroi (except when levied in the form of entry tax) from eligibility for input tax credit.

The provision for collection from and refund of VAT to exporters which were not EOUs/SEZ units might lead to corruption, the SICCI said.

A. Sakthivel, chairman, FIEO, southern region, and chairman, Apparel Export Promotion Council (AEPC), said waiting for refund of VAT from the State Government would increase the transaction cost of exporters. Hence, exporters should be granted exemption from VAT through self-declaration in a form similar to Form H.

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