If the duty drawback policy is not tweaked, the textile industry may lose close to Rs 1,500 crore refunds
A 5% overall GST rate might have pleased the cotton textile industry, but there are significant worries among garment exporters as the migration to the new tax regime would need significant tweaking of the duty drawback schemes that have helped Indian exports compete in an increasingly adverse global market.
"The major concern of the textile exports industry is what would happen to the various drawback benefits, and particularly how the refund mechanism would play out. Today the industry is surviving because of drawbacks. We don't know how the changeover will play out and concerned with the drawback benefits whether they would stay or go away," Anil Buchasia, eastern region chairman of Apparel Export Promotion Council, said.
To illustrate, the government's recently launched policy of refunding state levies to exporters called Remission of State Levies (RoSL) can't exist in the new tax regime as there would be no state taxes.
If the policy is not tweaked to accommodate GST, the textile industry is set to lose close to Rs 1,500 crore refunds budgeted for the current year. According to a textile ministry secretary, the scheme is being studied to make it compatible with the GST regime.
"It will probably undergo some changes because VAT (value added tax) is being subsumed under GST. It is being studied right now," said Subrata Gupta, joint secretary, Union Ministry of Textiles, at a road show for Textiles India.
Exporters had been getting duty drawback on the central levies imposed during the process of manufacturing of goods for exports. And, beginning December, they started to get reimbursement of state levies as well.
The scheme, under which Rs 400 crore was disbursed since its launch in December is largely seen as helping boost exports in recent times.
While there would be input tax credits under GST, there are many costs which were being taken care of under the various duty drawback schemes.
"There are many hidden costs as well. Unless they are addressed under GST, India would lose out to neighbouring countries, particularly while exporting to the European Union," Buchasia said.
Both Bangladesh as well as Vietnam have now surpassed India in apparel exports.
"On top of it, Sri Lanka has recently got the GSP plus status from EU under General System of Preference, which is being enjoyed by Bangladesh and Vietnam. With a significant portion of Indian apparel export going to EU, we need desperate measures to protect our turf," he said.
FACING LOSSES
- If the duty drawback policy is not tweaked, the textile industry may lose close to Rs 1,500 crore refunds
- According to textile ministry, the scheme is being studied to make it compatible with the GST regime
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