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Will garment exports benefit from Duty Drawback Rate hike?

Effective immediately, the rates were raised across all varieties, i.e., cotton, manmade fibre (MMF), nylon, yarn, fabric and others to cover the entire value of the textile sector with a major aim to boost their exports from India.  After a long period of dullness, textile and apparel exports from India jumped by a staggering 33 percent between April and October 2018 due to spurt in the demand from the United States. India’s textile and apparel exports rose significantly to other regions also, including the Middle East and Far East.

In a major boost for Indian textile exports, the government raised duty drawback rates for all segments to enable exporters to tap global markets with full potential and increase textile and apparel shipments from India. The Ministry of Commerce and Industry has increased duty drawback from 1.2 to 1.7 percent for cotton yarn, from 1.3 to 1.6 percent for cotton fabric and from 2.0 to 2.6 percent for made-ups. However, there is a marginal decrease in the duty drawback rates of apparel items. The ministry periodically reviews the duty drawback rates after analysing the Duty Drawback Committee findings and recommendations and revises the rates so that all the central taxes are refunded.

Effective immediately, the rates were raised across all varieties, i.e., cotton, manmade fibre (MMF), nylon, yarn, fabric and others to cover the entire value of the textile sector with a major aim to boost their exports from India.  After a long period of dullness, textile and apparel exports from India jumped by a staggering 33 percent between April and October 2018 due to spurt in the demand from the United States. India’s textile and apparel exports rose significantly to other regions also, including the Middle East and Far East.

“The revised drawback rates will lead to increased exports of cotton textiles and other products in the value chain. There is a significant increase in the drawback rates for cotton made-ups, which will encourage export of value added products like home textiles. Further, removal of drawback caps in the case of those export products where the drawback rates are less than 2.0 percent will benefit the cotton textiles exporters,” said K V Srinivasan, Chairman, The Cotton Textiles Export Promotion Council (Texprocil)

India’s textile and apparel exports jumped by 38 percent in INR to Rs 20,353 crores (Rs 203.53 bn) in October 2018 from Rs 14,779 crores (Rs 147.79 bn,) in the same month last year.  While overall textiles exports posted a jump of 28 percent, shipment of apparel from the country shot up by 54 percent in the month under consideration.

Texprocil, meanwhile, urged the government to increase the Merchandise Exports from India Scheme (MEIS) rate for fabrics from two to four percent and also to cover cotton yarn under the MIES apart from the three percent Interest Equalisation Scheme so that exports of cotton textiles could achieve its true potential.

“The increased drawback rates will provide relief to the exporters. In the view of the significant duties / taxes embedded in the manmade fibre (MMF) textile segment, the drawback rates declared now need to be enhanced at least up to six to seven per cent from the existing one to three per cent,” said Sri Narain Aggarwal, Chairman, Synthetic and Rayon Textiles Export Promotion Council (SRTEPC).

The maximum increase of Drawback rates on MMF textiles is by about 1.5 percent and the product Nylon Filament Yarn (dyed) has also been added to the drawback scheme.

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