The turmoil of GST has not seep through and the industry has now got another
shock with the new duty drawback rates were announced. The new drawback rates
will be effective from 1st October 2017 (post-transition period ending 30th September
2017). The new All Industry Rates (AIR) for garments is %2 as compared to the %7.7
drawback available till now. The low rate is unexpected as this would be a big blow
for industry already reeling under pressure due to continuous decline in exports
owing to slow market conditions, rupee overvaluation and uncertainties in the
business post GST. Along with that the increased working capital requirements and
labour wages has affected the business.
With this steep decline in the drawback support over 7000 small and medium enterprises in the apparel exports will be crippled and doomed in uncertainties. This will have an adverse impact on the employment being provided to over 12 million people be provided by this sector. Commenting on the issue, Ashok G Rajani, Chairman Apparel Export Promotion Council said, “The apparel industry needs to book orders in advance for the next season. The uncertainty prevailing for the last three months regarding the GST rates on apparel and job work have already cost the industry’s order books.
I think the present new rates are unacceptable and the Ministry of Textiles should immediately consider AEPC’s recommendation for extending the current transition rates till 31st March 2018, to instil confidence in the sector and also ensure a smooth transition into GST and also for sustaining the employment in the sector.” According to him in the absence of an encouraging drawback rates, the exports will further witness a sharp decline just ahead of the peak festival season when the industry was expecting recovery.
AEPC has been in constant consultation with the Drawback Committee and various ministries for identification and consideration of several embedded / blocked taxes which are presently not subsumed in GST, not considered in the drawback, and hence a loss to the exporters. The industry was expecting continuation of the present drawback rates till such time as these consultations could be completed and proper measures taken to ensure that exports remain zero rated and no taxes are exported.
There is 7%-8% month-on-month drop in ready-made garment exporters and the main reason cited is appreciation of rupee against the dollar. When exports are already under stress and when the industry is not clear on the input tax credit that would be available, the industry should be supported.
"The step taken by the Government has put a lot of pressure on the industry. We cannot give any suggestion as the Government is smart and doing what they feel is right.