GST overhaul: Export status for contract manufacturing to boost supply-chain shifts to India
GST reforms treating contract manufacturing for foreign principals as exports could boost India’s appeal as companies relocate parts of their supply chains. Expanded refunds covering input services and capital goods, faster 90% refunds and measures to release blocked tax credits are also expected to unlock working capital and support investment.
The Indian government's recent overhaul of the Goods and Services Tax (GST) system aims to stimulate supply-chain shifts towards India, benefiting businesses engaged in contract manufacturing for foreign clients. By treating such manufacturing operations as exports, the reform seeks to level the tax playing field with international competitors.
This move could unlock working capital for companies investing in new production lines, according to Nimish Bhatia, a partner at PwC. With the automated release of a 90% refund within three business days, manufacturers and exporters will gain significant liquidity, allowing them to reinvest in their operations. Experts also highlight that broadening the refund framework to include input services and capital goods could potentially free up 2% to 3% of revenue for reinvestment.
The policy changes, set to take effect from April 1, 2027, target various sectors, including manufacturing, exports, e-commerce, hospitality, and logistics. These reforms promise to enhance tax certainty, reduce litigation, and bolster India's appeal as a global investment destination.
Written by urgent.news from The Economic Times - Economy's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
