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Notification on withdrawal of duty-drawback unfair - TEXPROCIL
May '10
The Government has withdrawn the Duty Drawback on exports of cotton yarn vide a notification dated 29th April 2010. Shri V.S.Velayutham, Chairman, Texprocil in a statement stated that this step on the part of the Government is unfortunate with long term implications for the healthy development of the Indian Textile Industry in the future. Withdrawal of Duty Drawback rates on cotton yarn, Mr.Velayutham pointed out is also highly discriminatory as all other export products are eligible for the refunds. It would mean that the product does not suffer any incidence of either Excise or Custom Duty or Service Tax.

Shri Velayutham said that the Duty Drawback Scheme was a time tested scheme aimed mainly at reimbursing the incidence of Customs and Excise Duties levied at the input stage of the product concerned. It was determined on the basis of certain broad parameters including, inter alia, the prevailing prices of inputs, standard input/output norms (SION), share of imports in the total consumption of inputs and the applied rates of duty. Further it is not an export subsidy contingent in law or in fact upon export performance. The WTO Agreement on Subsidies and Countervailing Measures (ASCM) clearly permits exemption or remission of prior stage cumulative indirect taxes or import charges levied on inputs that are consumed in the production of the export product.

By withdrawing the Duty Drawback on cotton yarn when no changes in the Import and Excise duties on textile products had taken place in the Union Budget 2010-2011, Mr.Velayutham pointed out that the Government is itself questioning the rationale of its scheme which is essentially meant for reimbursing central indirect taxes suffered at the input stage in the manufacturing process. The country will open itself to fresh Anti Subsidy Proceedings (on the lines of an earlier investigation by EU on Bed Linen) on almost all products of export interest including Home Textiles and Garments whose rates are much higher than cotton yarn, as an impression has been generated that this instrument in some way subsidizes Indian exports.

Mr.Velayutham stated that it was a matter of deep regret that the Government did not await the Report of the Expert Committee which is going into all the parameters like the price of inputs, including the incidence of input stage duty suffered in the manufacturing process of cotton yarn. By withdrawing the Duty Drawback on cotton yarn arbitrarily, the Government has dealt a severe blow to export trade and gone against its own principle of exporting goods and not taxes. He appealed to the Government to reconsider its decision in the larger interest of export trade.

TEXPROCIL : The Cotton Textile Export Promotion Council

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