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GST relief for exporters on the cards

In a big relief to Exporters, the government is all set to restore a majority of benefits under the duty drawback schemes, meant to reimburse taxes paid by them in a latest move aimed at fixing glitches that have emerged since the roll out of the goods and services tax (GST) almost four months ago.

Exporters have been complaining that the new duty drawback rates have severely eroded their competitiveness, already hit by a higher working capital requirement due to absence of timely refunds, resulting in a massive shift in orders to other countries like Vietnam, Cambodia and Bangladesh and causing widespread job losses in sectors such as textiles and leather. The distress has acquired a sharper diamension ahead of the Elections to Gujarat Assembly, the state which contributes to both textile and leather exports

Though a committee headed by former home secretary G K Pillai is looking at various options, including proposing refunds of some state levies, the government has decided to go ahead and revise duty drawback rates. Both textiles and commerce Ministries have taken up the issue with finance ministry and a decision could be announced  shortly.

For cotton and viscose textiles, the change in the duty drawback rates and refund of state levies (ROSL), which was in the range of 11-13 per cent will now come down by  nine per cent according sources in the industry.There was a spurt in shipments since exporters had the option to use the earlier drawback rates till September. But in October you will see a significant fall in garment exports due to implementation of GST.

A garment exporter who deals with global firms said the change in the drawback rates has pushed up the cost of his products from  one to nine dollars, which led to some foreign buyers opting to turn to Vietnam and Bangladesh, which already have a considerable advantage on labour costs.

A lot of exporters had contracted based on earlier rates. Because of drastic increase in rates due to implementation of GST, many of them are complaining about loss of competitive edge affecting them as the orders placed in May or June will see supplies till December-January. As a result  the exporters have sought restoration of drawback. The problem with GST refunds is persisting and a restoration of the rates will reduce the pressure on GST refunds," said Ajay Sahai, Director General of the Federation of Indian Export Organisations (Fieo).

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