Recently in a letter AEPC has asked the Ministry of Finance for the refund of IGST paid on import of machinery used by the apparel manufacturer exporters. In a letter written to Ministry of finance, AEPC has said after the implementation of GST from 1st July 2017, apparel exporters are required to pay Integrated Goods and Service Tax(IGST)up to 18% on assessable value plus Basic Custom Duty while clearing shipments of capital goods under Export Programme Grant Scheme. The incidence of a very high Integrated Goods and Service Tax, without any corresponding relaxation for export obligation has rendered the Export Programme Grant Scheme unattractive.
In a letter written to the Chairman of the Drawback Committee of Ministry of Finance, AEPC Chairman has highlighted the incongruous situation which has come on the surface after the implementation of Goods and Service Tax. The letter states that the only way for apparel exporters to claim IGST refund is through input tax credit but apparel exporters who import capital goods normally export 100% of their products and doesn’t sell their products in the domestic market. Hence, issue of utilisation of input tax credit doesn’t arise for these exporters. On the contrary, domestic players who are importing capital goods are better placed as they have various opportunities to utilize input tax credit.
Chairman of Apparel Export Promotion Council further lamented that during pre-GST regime apparel exporters were availing benefit of EPCG scheme, where exporters were allowed to import capital goods without paying any import duty, scheme was very popular amongst apparel exporters and encouraged many of them to invest in new units or go for expansion but the recent policy there has been no clarity on the refund proceeds of IGST. The working capital requirement of the exporters have gone up drastically due to the high rate of IGST which has not only added to the cost of production but has created a glaring anomaly by making domestic operations attractive compared to exports.
AEPC has informed the ministry that refund mechanism of input tax credit on account of IGST has become a matter of serious concern in order to create a positive eco system of investment, expansion, employment and export, it is important that Government intervenes in this matter and provide the best possible assistance to the exporters.