GST UPDATE ON E-WALLET

GST UPDATE ON E-WALLET

The GST Council’s 22nd meeting has proposed long term support to Exporters by introducing the concept of E-Wallet for the simplification of refund Process. E-Wallet shall be transferable and can be used for payment of duty but it cannot be given in cash as said by Revenue Secretary Hasmukh Adhia in his statement, which is reproduced as follows.

Asked by when the issue of refunds to exporters would be settled, Adhia said "it will be solved in a month or two".

After March 31, there will be a system of e-wallet, where a notional credit will be made into the holder's account so that the same could be used for payment of GST. The credit would be made to exporters based on their past performance or on the basis of export orders in hand, he said, adding this would mean no hard cash is spent on taxes.

"It is possible that the manufacturing exporter himself has no liability to pay, but the supplier who gave him inputs may have. So, he can transfer credit (from e-wallet) to the supplier account. So, the e-wallet would be transferable, just like any other wallets, but the only restriction is that it can't be given in cash, it can be only used for payment of GST," he said.

After executing the export order, a refund application will have to be made and the refund will be credited in form of credit to the same e-wallet.

"So, his account will get replenished by the refund. So, the refund process will take place, but he is not deprived of funds and will not have to invest his own working capital. Liquidity will be maintained with him," he said.

The Press note on Export Package has been issued supporting the above statement and that the council decides to make this operational from 1st of April 2018.

An abstract idea of E-Wallet can be interpreted with the help of an example. A specified amount in the e-wallet will be credited by the Government based upon the export performance of previous year. Suppose the amount so credited is Rs. 10 lacs in the e-wallet of exporter X Ltd. Suppose X Ltd. does not require any credit as there is sufficient amount of credit lying with it and it purchases inputs amounting to Rs. 2 lacs on which GST amount comes Rs. 20,000/-, thus, the total invoice value including the GST is Rs. 2,20,000/-. X Ltd. can transfer the amount of GST, i.e. Rs. 20,000/- from e-wallet to the supplier. So, he will be required to pay only the basic value of Rs. 2 lacs to the supplier in cash. Similarly, this can be done in every case of purchase of inputs, capital goods or input services. Therefore, the amount of GST can always be adjusted from e-wallet. Accordingly, only the net value of goods/services will be payable by the exporter. Further, it has also been clarified that the amount of refund will also be credited to the e-wallet only.

The first sight of the scheme sounds good except that the encashment of amount lying in the e-wallet will not be allowed. However, the amount of tax that will not be required to be paid in the cash is also a type of encashment only. But a lot of Clarifications are yet to be made from the Council about how the credit of input is to be transferred to the Supplier. Hope to get a much clearer picture of this. Cash payment of the same will be required. Say for example, the supplier of goods has enough balance and does not want to avail the e-wallet credit. The refund of the balance will be allowed in that case. Several clarifications of such type are required.

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GST UPDATE ON E-WALLET

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