Consequent to the significant changes made in the tax structure after the implementation of GST, the textiles and clothing industry has been demanding that the government announce enhanced duty drawback rates.
The duty drawback has been increased from 1.2 per cent to 1.7 per cent for cotton yarn, from 1.3 per cent to 1.6 per cent for cotton fabric, and from 2 per cent to 2.6 per cent for made-ups.
The increase (in duty drawback rates) would help exporters improve their competitiveness, especially in countries with which India has preferential tariff agreements (PTAs). The removal of value cap on most of the items, which has been discouraging value addition, is another welcome feature of the announcement.
However, there is a marginal decrease in the duty drawback rates of apparel items. Considering the continuous fall in garment exports, the industry was hoping for increase in drawback rates. The government could have at least continued the existing rates of duty drawback to sustain the existing level of garment exports. The reduction in drawback rates on garments might have negative impact on exports.