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Apparel exporters demand refund of GST on import of machinery

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.


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