Indian textiles and clothing exports has been struggling during the last three years due to the absence of level playing field in the global market mainly because of high tariff rates in major markets and also non-refund of several taxes and levies. Under the GST regime, it was promised that all taxes and levies would be refunded.
The Central Government realizing the need for boosting textile exports and create jobs, announced a special package of Rs 6,006 crores during September 2016 for garments and included made-ups recently giving enhanced duty drawback rate and also ROSL (Refund of State Levies). However, the present announcement of the government on duty drawback rates does not synchronize with the earlier government announcement of boosting exports and job creation.
P Nataraj, Chairman, The Southern India Mills’ Association (SIMA) has appealed to the Ministry of Finance to have a re-look at the drawback rates applicable for textiles, refund all the blocked, embedded taxes, levies and accumulated input tax credit on fabric especially the processed fabric. Nataraj has stated that the cost of dyes and chemicals accounts 30 to 40 per cent of the processing charges. He also added that the service tax has been increased 15 to 18 per cent and several services have been brought under tax net under GST.
SIMA chief has felt that at yarn stage the actual drawback rate would work out to 2 to 2.5 per cent and at grey fabric stage, the same would work out around 3 per cent while at finished fabric, garments and made-ups would work out to more than 5 per cent. The exports will suffer very seriously and dwindle down sharply. Nataraj has stated that the Government must ensure that no taxes are exported so that the exports will be competitive. In order to protect the jobs of several millions of people in the textile industry, he has urged the Government to extend the existing drawback benefits till the GST anomalies and problems are fully sorted out and also the realistic drawback rates refunding all blocked, embedded taxes and levies including accumulated input tax credit at fabric stage are fully taken into consideration.