Export-oriented auto manufacturers like Ford India, Nissan and Volkswagen are suffering as the current goods and services tax (GST) system of making payments upfront and claiming input tax credit is not working properly. According to industry estimates the stuck amount is around Rs 1,000 crore as these manufacturers have not been able to file claims since July. Industry executives explained that for export-oriented auto firms, there are two mechanisms to expunge tax content in exports. One is to pay tax (GST) upfront and claim input tax credit while the other is to adjust the taxes paid on components used for making vehicles for exports against domestic purchases of components for vehicles made for sales in the domestic market. Since manufacturers like Maruti Suzuki and Hyundai Motor have large domestic sales, they have opted for the second route and, therefore, do not have claims stuck.
However, manufacturers like Ford, Nissan and Volkswagen have the bulk of their revenue from exports rather than domestic sales so adjustments are not enough to fully neutralise the tax content in their exports. Hence they are hit the most by delays in release of input tax credits. In the July-October period, passenger vehicle exports declined by 14.45% to 2,35,933 units on a year-on-year basis and industry sources said that apart from the slowdown in major export markets, GST refund issue has also played a part in it. According to the Central Board of Excise and Customs, the quantum of Integrated GST refund claims by exporters, as filed through shipping bills from July to October, is around Rs 6,500 crore and the quantum of refund of unutilised credit on inputs or input services, as per the RFD 01A applications filed on the GSTN portal, is to the tune of Rs 30 crore. Exporters said less than Rs 500 crore worth refunds have been made so far.”