“The reduction in the GST rate for job work in the madeups and garment sectors is welcome and a positive measure which will bring down the costs for the textiles sector across the value chain,” said Texprocil chairman Ujwal Lahoti in a media release.
“Majority of the manufacturing activities in the textiles sector take place through job work and the reduction in the GST rate for job work has come as a huge relief for the sector,” he added.
With regard to exports, Lahoti said, “Merchant exporters cannot benefit from the facility of exports under bond/ letter of undertaking (LUT). There is no enabling document prescribed so far by the Government under which goods can be cleared by a manufacturer without charging IGST meant for exports by a merchant exporter against bond/LUT.”
In the absence of a prescribed provision, manufacturers charge IGST on the goods supplied by them to the merchant exporter meant for exports under bond/LUT. While in the erstwhile Central Excise regime, there was a facility under which a merchant exporter who had executed a Bond (B-1 Bond) was provided with C.T.1 certificates. The manufacturers supplied the goods without charging Central Excise duty to the merchant exporters against the C.T.1 certificates.
Texprocil chairman urged the government to introduce a facility similar to the one that existed previously, at the earliest so that the merchant exporters exporting under bond/LUT can get IGST free goods from the manufacturers.
The Foreign Trade Policy allows fulfilment of export obligations under various schemes though ‘third party exports’. Such a provision of getting exports goods without payment of IGST from the textiles manufacturers will lead to ease of doing business and also seamless flow of credits, according to Lahoti.
Further, to operate under the facility of bond/ LUT, a Bank Guarantee is required to be furnished by the exporters. However, in the Central Excise regime, merchant exporters who were members of an Export Promotion Council (EPC) were exempted from furnishing Bank Guarantees while executing B-1 Bond. Texprocil chairman urged the government to exempt those exporters holding a valid membership with an EPC from furnishing Bank Guarantees as it increases costs for the exporters. (RKS)
Fibre2Fashion News Desk – India
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