Illustration: Ajay Mohanty
The Central Board of Excise and Customs' (CBEC's) decision to revise the duty drawback rate from 7.6 per cent to two per cent and reduce the value cap does not augur well for the knitwear exporters in Tirupur, Tamil Nadu.
The reduction in drawback rate for knitwear exporters is a death knell for Tirupur's garment export sector and has come as a shock to exporters who are already facing severe competition in the global market, said Raja M Shanmugham, president, Tirupur Exporters Association.
He added that once buyers go out of the country due to higher prices, it is very difficult to bring them back since they settle with competing countries like Bangladesh, Sri Lanka, Cambodia, and Vietnam, among others.
The association also warned that this may lead to more job losses and noted that 80 per cent of the garment units come under micro, small and medium enterprises.
The Southern India Mills’ Association (SIMA) Chairman P Nataraj has urged the Ministry of Finance to have a re-look at the drawback rates applicable for textiles, and refund all the blocked embedded taxes, levies, and accumulated input tax credit on fabric, especially processed fabric.
The old and new drawback rates for cotton yarn, cotton grey fabric, cotton garment and made-ups are given below: