The GST Council is likely to consider a package of changes aimed at making it easier for exporters to claim refunds, unlock working capital and align the indirect tax rules with the way Indian companies operate in global markets, as it meets on October 7.
The proposed measures could provide some relief to exporters facing heightened uncertainty from trade disruptions, wars and shifting supply chains. Faster recovery of taxes and release of working capital could help exporters manage higher logistics and financing costs and remain competitive amid volatile global trade conditions, an industry official said.
One of the issues the Council may consider is the treatment of supplies made by Indian companies through their own foreign branches. Under the existing framework, transactions involving establishments of the same legal person can face difficulties in meeting the conditions for an export. The proposed change could remove this hurdle and make the location of the customer, rather than the manner in which an exporter has structured its overseas operations, the key consideration.
The recent US experience with tariff refunds has also highlighted the importance of this corporate structure. Under the US system, refunds of certain tariffs are linked to the importer of record—the entity that made the customs entry and paid the duty—giving companies whose own overseas entities served as importers a more direct route to recover the tariff.
Exporters claiming duty drawback may also be covered for refunds, while the existing cap linked to domestic prices could be removed.
The Council may also consider changes in the treatment of job work carried out in India on goods belonging to foreign customers. Such goods are often sent to India for repair, testing, certification, storage or processing. The proposed approach would link the place of supply to the location of the foreign customer rather than where the work is physically carried out, potentially allowing such transactions to qualify as exports even when the goods remain in India.
Another issue on the agenda, sources said, could be supplies made to foreign buyers where the goods are delivered, at the buyer’s direction, to a Special Economic Zone (SEZ) for storage or processing. Such transactions may qualify as exports where payment is received in foreign exchange, or in rupees where permitted by the Reserve Bank of India.
The Council may also consider widening the pool of taxes that exporters can recover, particularly by bringing tax paid on plant and machinery into the refund framework. The proposed refund for plant and machinery would be spread over five years, helping exporters unlock working capital. The package could also streamline refunds of eligible input taxes, including those relating to services.
The existing rules have capped the export turnover used for refund calculation at the lower of actual export value and 1.5 times the value of similar goods domestically supplied by the same or similarly placed supplier. While this was done to tackle inflated refund claims by overstating receivables, it did not account for foreign market conditions and other additional inputs that could increase the product’s price.
The refund process could also be made more automated. Under the proposal, claims would have to be acknowledged within 10 days; the claim is deemed acknowledged if the officer does not act within the prescribed period. As much as 90% of an eligible refund could then be released after a risk check, with the balance paid following verification. Export invoices would also be matched electronically with bank realisations.
The Council may further consider clarifying the treatment of export payments, including when payment is regarded as having been received and the deadline for bringing export proceeds into the country. The proposed clarification would align the GST position with the applicable RBI rules.
This directly responds to the demand for uniform treatment of export proceeds across GST, banks and FEMA/RBI compliance, the industry official said.