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Web Exclusive | December 2018

Hike, & cut too in duty drawback rates

The Indian Government has marginally increased duty drawback rates for several textile items, applicable for the year 2018-19. However, there is a marginal decrease in the duty drawback rates of apparel items. The announcement made through Ministry of Finance’s Notification No. 95/2018-CUSTOMS (NT) shall come into force from December 19, 2018. 

The duty drawback has been increased from 1.2 per cent to 1.7 per cent for cotton yarn, from 1.3 per cent to 1.6 per cent for cotton fabric, and from 2 per cent to 2.6 per cent for made-ups. The ministry of commerce and industry periodically reviews the duty drawback rates by mandating the Duty Drawback Committee and revises the rates so that all the central taxes are refunded so as to avoid export of taxes and have a level playing field in the global market. “Consequent to the significant changes made in the tax structure after the implementation of GST, the textiles and clothing industry has been demanding the government to announce enhanced the duty drawback rates,” P Nataraj, chairman, The Southern India Mills Association (SIMA), said.

“The increase (in duty drawback rates) would help the exporters to improve their competitiveness especially in the countries with which India has preferential tariff agreements (PTAs). The removal of value cap on most of the items, which has been discouraging value addition, is another welcome feature of the announcement,” Nataraj added. 

On marginal decrease in the duty drawback rates of apparel items, Nataraj said that considering the continuous fall in garment exports, the industry was hoping for increase in drawback rates. “The government could have at least continued the existing rates of duty drawback to sustain the existing level of garment exports. The reduction in drawback rates on garments might have negative impact on exports.” He appealed the government to at least retain the existing rates, and added that it is essential to refund the embedded/blocked taxes and also the inverted duty to further improve the competitiveness of the country’s textile and clothing sector. 
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