The Central Board of Excise and Customs (CBEC) has decided to reduce duty drawbacks (tax refund) for exporters of leather, textiles, sports and some other items by up to 30 per cent.
In its new notification, the CBEC has said the new rates will be effective from September 20.
“Like in previous years, the drawback rates have been determined on the basis of certain broad parameters including, inter alia, the prevailing prices of inputs, standard input output norms (SION), share of imports in the total consumption of inputs and the applied rates of duty…
“The Commissioners may ensure that the exporters do not avail themselves of the refund of this tax through any other mechanism while claiming the All industry rates of duty drawback,” the CBEC said in its notification. “The drawback schedule includes some new entries such as denim fabric and cotton garments, brass parts of ball or roller bearings and silk embroidery. The drawback rates have undergone changes in line with the changes in the prices of inputs and duties. Thus, the drawback rates have been changed in most cases,” it added.
Duty drawback for cotton garments has been reduced to 7.5 per cent from the present rate of 8.8 per cent, while for blended garments it will be 8.6 per cent, down from 9.8 per cent.
For leather and leather articles, the rate has been reduced by 5 to 15 per cent, in bicycle and sports goods by 9 to 20 per cent and articles of iron and steel by 25 to 30 per cent. In the case of stainless steel utensils and cutlery, the refund rate has been slashed from 12.5 per cent to 8.8 per cent.
Expressing its ‘deep disappointment' over the move, the Apparel Export Promotion Council (AEPC) said in the Union budget for 2010-11, there was a sharp increase in duties on most input materials and the excise duty was increased by about 25 per cent over last year. In addition, a fresh duty of 5 per cent was levied on crude oil — a key input in garment production process.
“In this scenario, the industry fails to understand the rationale of reduction of duty drawback by 15 per cent when duties were increased by over 25 per cent and fresh additional duties were also levied on inputs,” said AEPC Chairman Premal Udani in a letter to Union Finance Minister Pranab Mukherjee.
The recession for the readymade garment sector was far from over, he added. For the first four months of current financial year, exports declined by 8 per cent over last year.
The industry is reeling under unprecedented price rise of its basic materials like raw cotton, cotton yarns and fabrics.
“A contraction of exports means loss of jobs,” said the AEPC Chairman. “By our estimate, over one million jobs have already been lost. More will follow if urgent corrective steps are not taken,” he said and demanded scrapping of the new notification.
