BURN­ING IS­SUE

GST Com­pletes One Year...

Perfect Sourcing - - Front Page -

July 1st 2017 was one of the rev­o­lu­tion­ary years for ap­parel in­dus­try as GST the big­gest tax re­form was in­tro­duced, how­ever, post im­ple­men­ta­tion ap­parel and tex­tile in­dus­try has got into a rough phase. While the fab­ric man­u­fac­tur­ers who did not paid any taxes ear­lier now pay 5% on fab­rics and ex­porters who filled up GST are still wait­ing for re­funds.

Ac­cord­ing to the data, ap­parel ex­ports went down by 14% in Jan­uary this year. Ac­cord­ing to AEPC the gov­ern­ment has not yet cleared tax re­funds worth Rs 4,097 crore un­der GST. It is pre­dicted that In­dia won’t be able to reach the $20 bil­lion gar­ment ex­port tar­get look­ing at the con­tin­ued de­cline in ap­parel pro­duc­tion. AEPC said In­dia’s ap­parel pro­duc­tion has shown a de­cline of 4.7% in Fe­bru­ary and 9.9% from April to Fe­bru­ary this year. FY18. As per the gov­ern­ment fig­ures, Au­gust, Septem­ber, Oc­to­ber, Novem­ber and De­cem­ber recorded 6.4%, 7.2%, 11%, 13.1% and 13.5% dip re­spec­tively last year as well. There are two rea­sons for the con­tin­u­ous de­cline in growth. Lower de­mand for In­dian-made gar­ments in coun­tries like the US and UK and de­lay in IGST re­funds has made the sit­u­a­tion worse. This has af­fected the in­dus­try ma­jorly as due to fund block­age the man­u­fac­tur­ers are not able to pay sup­pli­ers on time.

Ac­cord­ing to the Ap­parel Ex­port Pro­mo­tion Coun­cil, em­bed­ded taxes for the gar­ment sec­tor, which in­clude the levies on cot­ton, elec­tric­ity, and in­put tax credit re­stric­tions for man-made fi­bres which is pur­chased from un­reg­is­tered deal­ers, put an ad­di­tional

bur­den of about 4-5 per cent on the in­dus­try.

An in­for­mal com­mit­tee set up by the Com­merce Min­istry to find al­ter­na­tive ways to com­pen­sate ex­porters once the Wto-in­com­pat­i­ble ex­port in­cen­tive schemes are with­drawn is closely ex­am­in­ing how ex­porters could be com­pen­sated for the non-re­funded taxes. The com­mit­tee, headed by the Direc­torate­gen­eral of For­eign Trade and com­pris­ing rep­re­sen­ta­tives from the in­dus­try and think-tanks, is also study­ing ex­pe­ri­ences of other coun­tries.

In­ter­est­ingly, the lat­est Eco­nomic Sur­vey sug­gested that the GST Coun­cil should con­duct a com­pre­hen­sive re­view of em­bed­ded taxes aris­ing from prod­ucts left out­side the GST (petroleum and elec­tric­ity) and those that arise from the GST it­self. The lat­ter, for ex­am­ple, could in­clude in­put tax cred­its that get blocked be­cause of “tax in­ver­sion,” whereby taxes fur­ther back in the chain are greater than those up the chain. “This re­view should lead to an ex­pe­di­tious elim­i­na­tion of these em­bed­ded ex­port taxes, which could pro­vide an im­por­tant boost to In­dia’s man­u­fac­tur­ing ex­ports,” the Sur­vey said. Al­though the Fi­nance Min­istry is try­ing to clear the back-log by or­gan­is­ing fort­nightly clear­ance camps, a sub­stan­tial amount is still pend­ing.

The over­all im­pact of the new tax regime has been bur­den­some for the ap­parel ex­porters es­pe­cially, small and medium ex­porters due to a con­sid­er­able in­crease of work­ing cap­i­tal as well as higher trans­ac­tion cost. Any piece of ap­parel or cloth­ing whose tax­able value does not ex­ceed Rs 1000 per piece is taxed at 5% un­der GST while any ap­parel or cloth­ing whose tax­able value is more than Rs 1000 per piece is taxed at 12% GST. Since AEPC in­formed the Min­istry of Com­merce that there has been a short­fall of about 5% un­der the new GST regime, there are chances that blocked taxes might be re­funded through higher draw­backs and ROSL along with GST in­put tax credit re­fund.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.