Government had defended the scheme as a valid indirect tax rebate, not as an incentive

The All-India Exporters' Chamber has expressed concern over the withdrawal of the duty drawback scheme for cotton yarn exports.

Chamber president Preeti Sheth has said in a release that the duty drawback scheme aimed at reimbursing the incidence of customs and excise duties levied at the input stage of a product. The government had entrusted the task of determination of drawback rates to an independent committee.

The rates were reviewed and revised every year.

The committee called for data for the respective product, verified through factory visits the inputs consumed and discussed the subject with Customs officials at ports before finalising it. The withdrawal of the rate on cotton yarn was discriminatory as all other export products were eligible for refunds. Ms. Sheth pointed out that the European Union had earlier tried to countervail the duty drawback scheme for bed linen imported from India terming it an incentive.

The Government of India had defended the drawback scheme at various fora as a valid indirect tax rebate. By withdrawing it for cotton yarn when there were no changes in the import and excise duties on textile products, the government was admitting that it was an incentive for exports. With this move, the country could open itself to fresh Anti-Subsidy Proceedings on almost all products of export interest.

The independent committee was reviewing the duty drawback rates and was expected to give its report in two months. Ms. Sheth appealed to the government to reconsider its decision in the overall interest of exports from the country.