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Govt announces new duty drawback rates for garments
Sep '17
The Government of India has today announced the new duty drawback rates to be effective from October 1, 2017 (post-transition period ending September 30, 2017). The new All Industry Rates (AIR) for cotton garments is 2 per cent as compared to the 7.7 per cent drawback available so far. The Apparel Export Promotion Council (AEPC) has expressed disappointment.
The duty draw back rate on garments of blend containing cotton and man-made fibre (MMF) will be 2.50 per cent beginning next month compared to the existing 9.5 per cent. Likewise, the rate on garments made of MMF will also be 2.50 per cent compared to 9.8 per cent at present.
Clothing items (under HS codes 61 and 62) made of silk (other than containing Noil silk) will be subject to a rate of 4.80 per cent as compared to the earlier 7.6 per cent. The duty drawback rate on woollen apparel will also come down from 8.7 per cent to 3.50 per cent.
The duty drawback rate on garment of blend containing wool and MMF will be 3 per cent from October 1, whereas the rate on all other garments will be 2 per cent.
This low rate is unexpected at a time when the industry is facing continuous decline in exports due to global conditions, rupee overvaluation and uncertainties under the GST regime. The duty drawback was one of the key policy support measures towards lifting industry’s cost competitiveness. However, due to the steep drop in the drawback support over 7000 small and medium enterprises in the apparel export sector will be crippled, creating an adverse impact on the employment being provided to over 12 million people by this sector, AEPC said in a press release. 
“The apparel industry needs to book orders in advance for the next season. The uncertainty prevailing for the last three months regarding the GST rates on apparel and job work have already cost the industry’s order books. I think the present new rates are unacceptable and the ministry of textiles should immediately consider AEPC’s recommendation for extending the current transition rates till March 31, 2018, to instil confidence in the sector and also ensure a smooth transition into GST and also for sustaining employment in the sector. In the absence of an encouraging drawback rates, the exports will further witness a sharp decline just ahead of the peak festival season when the industry was expecting recovery,” said AEPC chairman Ashok G Rajani.  
AEPC has been in constant consultation with the Drawback Committee and various ministries for identification and consideration of several embedded / blocked taxes which are presently not subsumed in GST, not considered in the drawback, and hence a loss to the exporters. The industry was expecting continuation of the present drawback rates till such time as these consultations could be completed and proper measures taken to ensure that exports remain zero rated and no taxes are exported, AEPC said.
Tiruppur Exporters Association (TEA) has also termed the reduction in duty drawback rate as death knell to Tiruppur garment export sector. TEA president Raja M Shanmugham said once buyers go out of the country due to higher price it will be very difficult to bring them back to our country. He apprehended that the latest step might lead to more job losses since 80 per cent of the garment exporting units are in MSME sector. (RKS)

Fibre2Fashion News Desk – India

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