After persistent calls from various industry groups, the government last week announced the enhancement of duty drawback rates to be effective from January 25, 2018. The enhancement of rates for 102 tariff items must come as a relief to all the companies dealing in the mentioned items.
However, representatives of textile industry have come forward to register their "disappointment" with the government for ignoring the calls of an industry which has been "one of the most impacted by GST".
"The notification just mentions wool items which is a very insignificant part of the textile industry. There is nothing on textiles. The textile industry is pretty disappointed that demands for increasing drawback or ROSL for yarn fabric and garments was not considered, despite the industry being in a very difficult position post-GST," says Confederation of Indian Textile Industry (CITI), president, Sanjay K Jain.
The domestic textile industry, inform its representatives, is getting flooded by imported material and it has become a concern for the SMEs operating in the sector.
"Export incentives have come down and at the same time import barriers have gone down, which has resulted in imports going up by 20% already, and in some cases like in Bangladesh garments have increased by 50%. Exports are coming down every month," says Sinha.
A decline of 3% in CAGR in textiles and apparels in the month of December last year compared to the corresponding period in 2016 has been reported. The exports came to $2996 million during December 2017 as against $3075 million in December 2016.
"The effective GST duty on fabric is 5% officially, but because of the non-refund of excess input tax credit under inverted duty structure, it actually adds up to 8-9%.This is making us lose to imports because they only pay 5% IGST," remarked Jain.
His concern is echoed by another industry association - The Textile Association of India. "We need genuine duty exemption in exports because money is getting stuck for manufacturers," says the national president of the Textile Association, Arvind Sinha.
The textile industry, both maintain, is under depression and Sinha says the "main issue is GST, GST and GST".
"Textile industry is not an industry where people can make a lot of money because the margins are very small," adds Sinha.
With days to go for the budget, both the associations have called for the government to take initiatives which can help the exports get a boost.
"The drawback rates or ROSL rates (Rebate of State Levies) for exports need to be increased to get them back to pre-GST level. The drawback rates have reduced considerably and the net which the industry was getting has come down. Import duty should also be restored to pre-GST level. It was much higher earlier and is disrupting the export to import ratio," says Jain.
The import duty, says Jain, has come down to 10% as compared to an average of 29%. "Basic duty plus countervailing and SAD has been reduced after GST," says Jain
Jain asserts that the impact has been worst on the SMEs in the textile industry. "Those guys are extraordinarily hit and they do not know where to go and whom to ask for redressal because they are not well organised," says Jain.
Source: economictimes.indiatimes.com