The Apparel Export Promotion Council (AEPC) — the apex body for apparel
exporters in India -- has asked the finance ministry for refund of Integrated
Goods and Services Tax (IGST) paid on import of machinery used by exporters
from the sector.
In a letter to the finance ministry, the AEPC said after the implementation
of GST from July 1, apparel exporters are required to pay IGST up to 18 per
cent on assessable value plus the basic customs duty (BCD) while clearing
shipments of capital goods under Export Promotion Capital Goods (EPCG) scheme.
The incidence of a very high IGST without any corresponding relaxation for
export obligation has rendered the EPCG scheme unattractive, it said.
In the letter to Mr. G K Pillai, Chairman of the Drawback Committee of
Ministry of Finance, the AEPC Chairman, Ashok G Rajani said the only way for
apparel exporters to claim IGST refund is through input tax credit. However,
apparel exporters who import capital goods normally export 100 per cent of
their products and don’t sell their products in the domestic market.
Hence, the issue of utilisation of input tax credit doesn’t arise for these
exporters. On the contrary, domestic players who are importing capital goods
are better placed as they have various opportunities to utilize input tax
credit,” Mr Rajani said.
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,” he said.
But after the implementation of GST, there has been no clarity on the
refund proceeds of IGST, he said, adding that the working capital requirement
of the exporters have gone up drastically due to the high rate of IGST.