India’s Apparel Export Promotion Council (AEPC) has expressed concern over the decline in apparel exports by about 40 per cent in October compared to the same month last year and has been engaging with policymakers for an early resolution of the issue that is hampering the apparel industry post implementation of the goods and services tax (GST).
An AEPC delegation led by chairman Ashok Rajani met chief economic advisor (CEA) Arvind Subramanian on November 16 to convey that the decline was primarily due to sharp reductions in the effective rates of drawback and rebate of state levies (RoSL), which has not only reduced the total reimbursements of duties for the sector but has also drastically affected the export prospects of the apparel sector, according to an AEPC press release.
AEPC, which had anticipated this decline following the GST roll-out, has already made several presentations to the textiles ministry, drawback committee, NITI Aayog and a parliamentary standing committee.
The AEPC delegation informed Subramanian about the recommendation of the drawback committee for a composite rate for apparel sector without GST credits as an option and requested him for an early expedition of the issue as that will benefit small scale exporters.
In its presentation to a parliamentary standing committee, AEPC urged for the extension of exemption of international GST on import under Export Promotion Capital Goods (EPCG) or Advance Authorization from March 31, 2018 to December 2018 to provide a longer window for investment decisions.
India’s apparel exports fell by 40.75 per cent in October to Rs 5,398.08 crore compared to Rs 9,110.75 crore in the same month in 2016. This includes garments of all textiles, according to the ministry of commerce and industry.
Exports of man-made textiles, including yarn, fabric and made-ups, during the month dropped by 8.26 per cent to Rs 2,309.57 crore, as against Rs 2,517.51 crore in October 2016. There has been an overall decline of 5.94% in the exports of apparels from India.
“The important point is the principle of reimbursement of domestic non-GST and GST central taxes in addition to customs through the drawback mechanism. This requires an amendment in the drawback rules to provide for reimbursement of GST duties. We therefore urged Dr. Subramanian that pending these legislative changes, the total duty reimbursements to the apparel sector be retained at pre-GST stage of 7.5 percent drawback without input tax credits, plus 3.5 per cent of RoSL. These pre-existing levels of reimbursement through the drawback and the RoSL routes may be maintained up to 31 March, 2018 to provide immediate relief to the reeling apparel sector”, said Rajani. (DS)