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Duty drawback rate cut upsets exporters

India has slashed duty drawback rates from October 1. Drawback is the refund of certain duties, internal revenue taxes and certain fees collected upon the import of goods when goods are then used for export. The slash would likely lead exporters to raise prices to balance the loss of revenue from the refund. The rates were lowered in 2016 as a boost to the apparel and textile industry, but the incentive program ended.

The new all industry rates for cotton garments was dropped to two per cent from 7.7 per cent while the duty drawback rate on garments containing cotton and manmade fiber blends will be 2.5 per cent compared to the existing 9.5 per cent and the rate on garments made of manmade fibers will also be 2.50 per cent compared to 9.8 per cent currently.

Clothing items made of silk will be subject to a rate of 4.8 per cent compared to the earlier 7.6 per cent while the rate on wool apparel will also come down to 3.5 per cent from 8.7 per cent. But apparel exporters are not too pleased. They say, in the absence of encouraging drawback rates, exports will further witness a sharp decline just ahead of the peak festival season when the industry was expecting recovery. They say the apparel industry needs to book orders in advance for the next season and the present new rates are unacceptable.