Exports Face A Drawback!

Misfortunes have come in battalions for textile exporters – firstly GST dilemma, then, hardening of rupee and now the axe on duty drawback rates. An exclusive ITJ Report throws some light on the issue.

Chips are down for the textile exporters now! After having felt the pinch of a stronger rupee in the last few months compounded by jitters over GST, the exporters are facing a heavily axed duty drawback rates – from about 7 per cent to 2 per cent! The drawback rate announced for garments is 2 per cent as against 7.7 pr cent earlier. In the case of made-ups, it was 7.3 per cent and has been reduced to 2 per cent now.

Says Rahul Mehta, President of Clothing Manufacturers Association of India (CMAI): “In the case of garments, the duty drawback system has been working well so far. But the Government has reduced duty drawback rates steeply with effect from October 1, 2017 in the context of introduction of GST and this have practically rendered our garment exports uncompetitive in the global markets.”

According to Dr Siddhartha Rajagopal, Executive Director, Cotton Textiles Export Promotion Council (Texprocil): “Under GST, exporters are allowed to take refund of the Input Tax Credit on the export goods. However, these refund are limited only to the extent of GST paid on inputs. Therefore, the lower rate of duty drawback along with input tax credits are not giving enough incentive and encouragement to export. In fact, cotton textiles export products have become uncompetitive against products from competing countries like Bangladesh, Pakistan, Vietnam, Sri Lanka, etc. on account of lower drawback rates.”