Good news for Indian textile and apparel industry! Govt approves scheme to rebate state and central embedded taxes

by Apparel Resources News-Desk

07-March-2019  |  2 mins read

Rebate State and Central Embedded Taxes

In a big relief to the Indian apparel industry, Union Cabinet chaired by Prime Minister Narendra Modi today approved scheme to Rebate State and Central Embedded Taxes. Main component of the decision includes increase in rebate by including both state and Central levies, extension of rebate up to 31st March 2020 and change into disbursal mechanism of the same.

The existing (old) ROSL scheme for both Apparel and Made ups has been discontinued.

The new scheme come into effect from 7th March as notification of the same has been issued. It is applicable for apparel and made-ups now and will be extended to yarn in the future. This ROSL for apparel and made-ups will amount to ₹6,300 crore revenue foregone per annum. Apparel products currently get ROSL of 1.5% to 1.7%. Embedded taxes are total up to 5%.

“The rates (including applicable value caps) of RoSCTL on export of garments and made-ups manufactured in India have been recommended by the Drawback Committee constituted by the Central Government notified by the Ministry of Textiles,” the notification reads

Rebate of State and Centre Levies / Taxes will be done through IT driven Scrip System thereby preventing delay and ensuring speedy disbursal.

However, this scheme only covers apparels and made-ups but does not cover other important sectors of fabric and cotton yarn. It is estimated that there are many blocked/embedded taxes/levies/ surcharges of about 6-7% for spun yarn and fabric sector which are not reimbursed and adding to the cost of exports. The industry has also been pleading to include spun yarn and fabrics under the RoSL benefit for the last two years.

Garment exporters are happy with this announcement, especially with the Central Embedded Taxes as they were struggling on this front. So far, apparel and made-ups segments are supported under the Scheme for Rebate of State Levies (RoSL). However, certain State and as well as Central Taxes, continue to be present in the cost of exports.

The decision is important as apparel & made-ups sector have combined share of 55 per cent (around US $ 21 billion) in the total Indian textile export basket. It will have a direct impact on these segments thereby increasing competitiveness of India’s textile exports globally.

The proposed measures are expected to make the textile sector competitive. Rebate of all Embedded State and Central taxes/levies for apparel and made-ups segments would make exports zero-rated, thereby boosting India’s competitiveness in export markets and ensure equitable and inclusive growth of textile and apparel sector.

Indian apparel exporters had a logic that there are many levies outside GST that are embedded in the export prices, and so they demanded often for higher duty drawbacks and RoSL rates.

This was the last Cabinet meeting ahead of the 2019 Lok Sabha election. There were some other decisions also taken in the meeting which are supposed to enhance infrastructure in India. It includes approving recommendations of the Group of Ministers relating to issues of stressed Thermal Power Projects and approving the revival and development of un-served and under-served airstrips of state governments and others.

“The increased rates of RoSCTL will help the beleaguered knitwear garment sector to enhance its competitiveness and sustain in the global market at a time, when our competing countries are enjoying the duty free status in the major markets like EU, USA and Canada” Raja M Shanmugham, President, Tirupur Exporters Association (TEA)

“The proposed measures will boost India’s competitiveness in export markets and ensure equitable and inclusive growth of apparel and made-ups sector. This scheme only covers apparels and made-ups but does not cover other important sectors of fabric and cotton yarn. To ensure that no taxes are exported and to make Indian cotton yarn and fabric globally competitive, we request the Government to include cotton yarn and fabric in the new proposed scheme. It will not only help to boost cotton yarn and fabric exports but also increase the employment opportunities and inclusive growth in the entire textile value chain” Sanjay Kumar Jain, Chairman, CITI

 “This decision has come at a right time and felt that it would benefit the garmenting and made-ups segments.  This would also increase the demand from the downstream sector and thereby strengthen the entire cotton textiles value chain,” P. Nataraj, Chairman, The Southern India Mills’ Association (SIMA).

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