I have to admit I am at a complete loss to understand the logic behind the Government’s decision to peg the Duty Drawback on Apparel Exports at 2 – 2.5 per cent. This is against the earlier rate of around 7.5 per cent. It is also said that the ROSL, previously at close to four per cent, will be reduced to around 2.5 per cent.
Now on the face of it, this seems perfectly acceptable since it only reflects the extent of embedded Taxes not likely to be available as ITC under GST. However, on deeper study, a few factors clearly stand out.
First, this assumes that all Garment Exporters, big and small, will get the Tax inputs passed on to them from Fabric Suppliers. This itself is a fallacy. The bigger players will of course manage to squeeze the suppliers to reduce their prices to reflect their credits – but it is unlikely that smaller players will be able to do that. In all probability, they will continue paying the same price for their inputs but with GST added – effectively increasing their costs.
Second, it assumes that the full extent of embedded Taxes is covered through the rates announced. This is far from reality. AEPC has submitted a detailed list and calculations which indicate a far higher figure of taxes yet embedded in the input costs – so one will end up exporting taxes along with the products. This is something Governments across the World accept, should not be done.
Thirdly, this is in complete contrast to the proclamations we hear day in and day out, that Textiles is a thrust area for the Government, primarily due to its Labour intensive character, and Job Creation being one of the focus areas of the Government. It is incredibly ironical, that on one hand we have State Governments virtually in a race to attract Investments in Apparel Manufacturing in their States, and on the other hand the Central Government knocking the bottom out of the profitability of Apparel Export Industry. It is time the Government realised that the Industry is fighting a lost battle against far more aggressive Governments and far more favourable Free Trade Agreements, and policies such as the one reflected in the Drawback rates announced, will only deal a death blow to our Industry.
I am not saying the Industry will die. I am not saying it will be destroyed or annihilated – there will always be the few who will grow in spite of all odds – but the Apparel Industry acting as a driver of Job Creation in the Country? Forget it!
From the President's Desk
I have to admit I am at a complete loss to understand the logic behind the Government’s decision to peg the Duty Drawback on Apparel Exports at 2 – 2.5 per cent. This is against the earlier rate of around 7.5 per cent. It is also said that the ROSL, previously at close to four per cent, will be reduced .... Read More