After the implementation of GST from July 1, 2017, apparel exporters are required to pay IGST up to 18 per cent on assessable value plus Basic Customs Duty while clearing shipments of capital goods under EPCG. The incidence of a very high IGST without any corresponding relaxation for export obligation has rendered the EPCG scheme unattractive, said AEPC chairman Ashok G Rajani.
"The only way for apparel exporters to claim IGST refund is through input tax credit but apparel exporters who import capital goods normally export 100 per cent of their products and do not sell their products in the domestic market. Hence, for them the issue of utilisation of input tax credit doesn’t arise. On the contrary, domestic players who are importing capital goods are better placed as they have various opportunities to utilise input tax credit," the letter stated.
"During pre-GST regime, apparel exporters were availing benefit of EPCG scheme where exporters were allowed to import capital goods without paying any import duty. The scheme was very popular amongst apparel exporters and encouraged many of them to invest in new units or go for expansion. But after the implementation of GST, there has been no clarity on the refund proceeds of IGST. The working capital requirement of the exporters have gone up drastically due to the high rate of IGST which has not only added to the cost of production but have created a glaring anomaly by making domestic operations attractive compared to exports. Therefore, we have requested the ministry to resolve the matter by taking up the matter with GST council to allow refund of IGST to exporters," added Rajani.
AEPC has also informed the ministry that refund mechanism of input tax credit on account of IGST has become a matter of serious concern as there is no clarity on the refund process. "Therefore, for creating a positive eco system of investment, expansion, employment and export, it is important that government intervenes in this matter and provide assistance to the exporters." (RR)
Fibre2Fashion News Desk – India