Apparel - - News -

Dear Friends,

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!

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