Perishable goods exporters have sought a parity in goods and services tax (GST) rate on sea and air freight to boost farm exports and increase competitiveness.
The demands have been put forth in representations to government ahead of the GST council meeting which begins on Wednesday.
While sea freight attracts 5 per cent levy, air freight is charged 18 per cent tax making exports costlier, the exporters have said. They have called for a uniform five per cent GST on all freight.
“GST Council has already rationalised rates for many food items reducing them to 12 per cent, 5 per cent or even zero in some cases. Aligning GST on air freight with that of sea freight (currently at 5 per cent ) will provide much needed relief to exporters and further support the Make in India initiative,” said, Vice-President, VAFA Fresh Vegetables and Fruits Exporters Association.
“One of the most critical challenges we face is the higher GST rate of 18 per cent on air freight. Air freight constitutes 60–70 per cent of the cost of consignments, whereas the product cost accounts for only 30–40 per cent,” said, CEO of Kay Bee Exports.
He added the 18 per cent levy negatively impacts working capital of exporters. “Reducing GST on air freight from 18 per cent to 5 per cent will not affect net tax revenue, as exporters currently claim refunds anyway. Lowering the rate will ease working capital requirements and reduce administrative overhead for both the government and exporters,” he added.
The demands for lower tax comes at a time when India seeks new markets for exports. Last year, India’s farm and fish exports stood at $52 billion. These included $6 billion exports to the US and those are under risk due to 50 per cent tariff levied by its government.
