GST to severely dent liquidity of exporters: FIEO

New Delhi: The Goods and Services Tax (GST) will severely dent the liquidity situation of traders and the compliance cost of merchant exporters may go up, top exporter body FIEO said on Friday.

According to the Federation of Indian Export Organisations (FIEO), export competitiveness of domestic players may fall by about 2 percent due to liquidity problems.

FIEO Director General Ajay Sahai said the government is looking into various options to neutralise the effect of GST regime.

"GST will severely dent the liquidity of the exporter in a big way and the compliance cost of the merchant exporter may go up. Export competitiveness of India may tank by about 2 per cent and this will be a big blow to exporters," he said in a statement.

FIEO President Ganesh Kumar Gupta termed GST as a "path breaking" reform, but it will bear fruits in the long run with initial hiccups.

He explained that the liquidity problem of the exporters, delays in initial returns for exports in July and August, procedural issues in bonds are being flagged by FIEO with the officials concerned. The issues were discussed in Mumbai yesterday.

Before GST, exporters used to get ab-initio exemptions from duties. But they have to pay first and then seek refund.

Due to this process, the FIEO stated that about Rs 1,85,000 crore will get stuck with the government.