Imbalance in apparel export rebate system erodes apparel and apparel industry competitiveness – Sangri Today

Based on estimated calculations, out of the total US$16 billion in apparel exports, about 5% are rebates, which is approximately INR 6,000 crore.

jaipur: Rajasthan is the largest producer of garments and textiles and overall the state’s garment manufacturing sector is worth INR 2,500 crores. Jaipur has become an important garment manufacturing center in India. According to industry estimates, there are currently 2,000 machines producing 20,000 pieces per day, which equates to a daily turnover of INR 5 crores. Currently, this industry provides employment for 5 lakh people only in Jaipur.

India currently exports more than USD 44 billion, of which USD 16 billion is garment and apparel exports. Huge exports aside, this industry employs around 4.5 million workers and is projected to be worth more than $209 billion by 2029.

However, the apparel exporter is deeply concerned about a loss of 15% of its margins due to rebates on state and central taxes and levies” (RoSCTL). As a result, Rajasthan garment exporters, like their other peers across the country, foresee a decline in export competitiveness.

RoSCTL was created with the intention of making India’s textile industry competitive and boosting its exports. However, certain changes were made to the regulation in September 2021 and its current form is eroding the export margins of the domestic textile industry. These changes run counter to the government’s intention to favor exporters and instead benefit importers. This defeats the very purpose and intent of this entire scheme, which is to further the government’s stated policy “Doing in India” For the world.

Mr. Vimal Shah, President of the Garment Exporters Association of Rajasthan (GEAR), said: “The textile industry wants the government to reintroduce cash refunds instead of these tradable scrips as these scrips are traded at a 20% discount. These scripts are sold by exporters to importers, who in turn can use these purchased scripts to pay their import duty as an alternative to cash import duty. This leads to significant money transfers from exporters to importers.”

Mr. Vijay Jindal, Member, Export Promotion, AEPC & President, GEMA said: “The RoSCTL scheme offers a rebate on the taxes, duties, etc. already paid by the exporters on the inputs. This rebate has been converted into tradable scrips, meaning exporters can sell scrips to importers and importers in turn can use these purchased scrips to pay import duty as an alternative to cash import duties. It used to be in discount as well but now the discount has gone from 3% to around 20% off the scrips. These discounts benefit importers, who reap undue advantages at the expense of exporters.”

Based on estimated calculations, out of the total US$16 billion in apparel exports, about 5% are rebates, which is approximately INR 6,000 crore. Broadly speaking, with a 20-25% discount on it, there is a direct hit of about INR 1,500 crore on the slender margins of companies operating in the apparel sector.

The aim of the program was to make the Indian textile sector competitive with other low-wage countries such as Bangladesh and Vietnam (due to low labor and manufacturing costs). The demand was in line with the government’s intention of always compensating exporters, but discounting scrips defeats the purpose and intent of this entire scheme. As it stands, importers benefit from discounting scrips, which take undue advantage at the expense of exporters. This defeats the very purpose and intent of this entire program rather than furthering the government’s stated policy of “Make in India” to the world.

Unless the government makes changes to the RoSCTL structure immediately, there is concern that the industry could lose its competitive advantage due to cost inefficiencies. The lack of support would again shift demand to other low-cost countries.

Also read: Cotton prices up 8% in August

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