Garment exporters in India claiming that the govt. is not properly addressing issues like refund of service tax on commissions paid to export agents

Saurabh Gupta | 30 Apr, 2008
While the government is hoping 10% growth in garment export in 2008-09, the reality seems much more bitter with a clear deceleration of textile and garment exports recently. India has fallen behind some of the much smaller economies like Bangladesh, Vietnam and Indonesia in apparel exports.

In 2006-07, India exported apparel worth $8.2 billion, which is slightly ahead of Bangladesh's $7.9 billion. The domestic apparel sector requires an investment of around Rs 35,000 crore to push exports to $25 billion by 2012.

There are expectations that Bangladesh will overtake India in garment and apparel exports, if the appreciation of the rupee continues at this rate.

"It is very true that due to currency appreciation the garment and textile industry is suffering in our country and on other-side other countries like Bangladesh and Indonesia are take it's advantage. But the thing is that the quality of Indian products are far batter then others," says K. K. Gupta, Partner of New Delhi based Jai Mata Garment Export.

"We too know the quality of Bangladeshi garments and soon the foreign buyers too will realise that the quality of Indian apparels are far better than that of Bangladesh. So I think there is no fear from these upcoming countries in this sector," he added.

Garment exporters in the country claiming that the government is not properly addressing issues like refund of service tax on commissions paid to export agents. Echoing the same problems, Amit Goyal, president of the Confederation of Indian Apparel Exporters, has offered some suggestions in this context.

Goyal says, "There is a cap of 2.5% commission to claim the refund. However, this does not make sense for exporters, since those claiming this cannot claim duty drawback benefits. Duty drawback clearly states that it is a refund of customs plus excise duties and does not include service tax. Hence, refunding service tax on commissions is of no use to exporters."

Goyal also says that the Mumbai airport Customs could also help the exporters. Stating that exporters bring valuable foreign exchange, he said that Customs in Mumbai, like in other airports, should accept cargo to be cleared under duty drawback round the clock. As of now, the deadline is 3 pm.

"Since many apparel exporters have very short deliveries and need to ship cargo in a time-bound manner, even a single day’s delay can cause huge losses. Export cargo should be treated as priority and cleared on a 24X7 basis." Goyal says.

Goyal also expresses his concern over apparel exporters claim that Customs holds back many consignments citing misdeclaration of high value. "Apparel shipped to the US and EU attract 15-30% import duty. It does not make sense for any exporter to ship at a high price as the importer will end up paying higher duty." he says. Therefore, he views that misdeclaration should not be cited to stop apparel shipped to countries where the import duty is higher than 10%.

"For a decade or so, apparel exports - especially in the readymade segment - have been rising at 10% a year; so, a 10% drop in exports actually means a decline of over 20%," says Mr Goyal.

Apparel Export Promotion Council (AEPC) has mentioned about the projects envisaged by council to uplift the Garment Trade both in International as well as in domestic markets.

"To meet out the challenges, it is imperative the need of implementing the proposed project so that industry can gear up to meet out the future challenges and achieve the set goals," said Mr. Rakesh Vaid, Chairman of Apparel Export Promotion Council, during his visit to Tirupur a couple of months back.

According to Apparel Export Promotion Council (AEPC), India's apparel exports is expected to rise in the coming months following a likely surge in overseas orders in the coming months. The second half of a financial year normally witnesses double exports compared with the first half due to summer and spring seasons in the overseas markets.