GST has not helped garment exports: Traders to Parliamentary committee

Business Standard By Subhayan Chakraborty October 28, 2017 01:21 IST

Exporters demand greater tariff support, higher drawback rates; say trade may dip soon

Photo: Shutterstock

Garment exporters have told Parliament's standing committee on commerce that they are yet to see any benefit from the Goods and Services Tax (GST), with no decrease in input costs.

A delegation of the Apparel Export Promotion Council (AEPC) also said shipments might dip in the globally competitive market. Bangladesh and Vietnam, for instance, have cost advantages on account of preferential trade agreements with major export markets and buyers are moving to these destinations for sourcing.

As a result, they have warned, they might be forced to shed jobs.

GST's compliance requirements, they've complained, has strained their time and cost resources. "The overall effect on apparel exporters, especially small and medium ones (MSMEs), is burdensome and stressful due to a substantial increase of working capital and higher transaction cost. MSMEs have to recruit the services of chartered accountants to manage GST payments and refunds," said Ashok Rajani, chairman of AEPC.

The body wants extension of the Integrated GST exemption on import under the Export Promotion of Capital Goods scheme or the Advance Authorisation scheme from end-March 2018 to December 2018. Apparel production, they contend, has been hit and the margins of exporters have come under more pressure due to the lowering of drawback rates.

However, a senior commerce ministry official said drawback rates would not be updated anytime soon. "The plan was earlier to phase out the rates three months after GST began. We have decided to extend that," he said.

However, export figures showed a surge across categories in September, including a 29.4 per cent jump in those of readymade garments. This was significantly up from the 0.5 per cent growth in August. GST was introduced from July 1.

Exporters say the rise was due to other reasons. "Exporters tried to push out built-up stock till September 30, when the old duty drawback scheme (DDS) was to be stopped," said Ganesh Kumar Gupta, president of the Federation of Indian Export Organisations.

He said October's easing in GST rules might take till November or December to reflect in the charts. This includes the government continuing the DDS through revised rates and easing the filing of GST documents.

Exporters have also asked for more tariff support under the Merchandise Exports from India Scheme (MEIS), to s five per cent rate, so that rising working capital and transaction costs are covered. And, for allowing the utilisation of MEIS scrips for use in payment of Central GST, State GST and Integrated GST, to ease the challenge from working capital blockage and other procedural issues.

They also want early refund of embedded taxes on purchase of ginned cotton and refund of miscellaneous central/state levies like the power cross-subsidy and stamp duty, under the Rebate of State Levies mechanism.

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