TEXTILE INDUSTRY HOPES DUTY DRAWBACK BENEFITS WILL CONTINUE

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Exporters remain wary about the duty drawbacks as clarity overcontinuation or in which form remains a grey area till now

The last 15 days were crucial for the textile industry, as the ambiguity over duty drawbacks continued. The duty
drawback benefits were available only tillSeptember 30. The textile manufacturing industry has been consistently appealing to the Centre to continue all export benefits till the business revives and returns to normalcy post the effects of demonitisation (and maybe the bad flavours of the 2014 recession). Industrialists also said that retaining drawbacks and refunding input tax credits were critical in keeping production costs low and for Indian products to remain globally competitive.

This comes in a drawback where the government has reduced the benefit on export for the textile manufacturers from 8.25 to 2.25. The government claims that after the Goods and Services Tax (GST) has come into implementation, the manufacturers will be enjoying the benefits of lower tax burden, presently fixed at 5% for textile manufacturers. This will considerably bring down their costs and increase profits, relieving them of various taxes that had been adding up to much more in the past. The government is of the view that since GST will enhance profitability, therefore, the drawback on the relief in taxation on exports will not have an adverse effect on the manufacturing industry.

Sometime back, the exporters were happy when the government had previously announced that the duty drawback
scheme would continue under GST. “Drawback scheme continues under GST. Existing rates of drawback to continue with minor changes for three months (1.7.17-30.9.17),” the Central Board of Excise and Customs (CBEC) had said. Further, the then Union Minister of State for Commerce and Industry, Nirmala Sitharaman, had assured industry captains that “drawback (benefits) shouldn’t be a problem”.

But now the scenario is a changed one and the textile manufacturers want the much needed stimulus which duty drawback provides to their business to continue.

Once again, the exporters have been urging the government to continue the benefits available through the duty drawback scheme. For instance, garment exporters get a duty drawback of 7.7% for knitted garments subject to price ceilings. For cotton knitted garments, the ceiling has been fixed at Rs 26.8 per kg.

Speaking to journalists, Chairman of The Southern India Mills’ Association (SIMA) and Managing Director, KPR Group, P Natraj, had said the government had not yet given the mandate to the duty drawback committee to recommend the revised duty draw back rates. Media reports had stated Mr Natraj as stating that: “With the ambiguity and uncertainty over duty drawbacks continuing, people are hesitating to take export bookings at the current rate, because the booking orders are likely to be delivered only after two months when a new drawback rate could be in place. We appeal to the Centre to extend all export benefits till the industry revives and ensure that pre GST export competitiveness is retained.

Industrialists also said that they required more clarity regarding GST Act and rules and the local authorities are often not able to provide immediate answers.

The industry is of the unanimous view that with the confusions surrounding the sector, the units are hesitating to take the export bookings at current rates. This hesitation is primarily because in case a unit takes an order at the present rate, by the time it is ready for delivery, there could be newer rates in place, therefore the traders as well as the units are in a fix situation. Therefore, it is being asserted by the textiles manufacturers that the government must consider extending all the export benefits for the sector till the industry stands on its feet and returns to the phase of normalcy.