The Southern India Mills’ Association (SIMA) has
appealed to the ministry of finance to have a re-look at the new duty drawback
rates announced by the Central Board of Excise and Customs (CBEC). It has also
urged the government to refund all the blocked, embedded taxes, levies and
accumulated input tax credit on fabric, especially the processed fabric.
The existing duty drawback rate on cotton yarn is 2.5 per cent, which is reduced to
1.2 per cent effective October 1, 2017. Likewise, the rates on cotton grey
fabric, cotton garments and madeups have been reduced to 1.3 per cent, 2 per
cent and 2 per cent from 4.3 per cent, 7.7 per cent and 7.3 per cent,
respectively.
In a press release, SIMA chairman P Nataraj stated that the cost of dyes and chemicalsaccounts for 30 to 40 per cent of
the processing charges. “Dyes and chemicals attract 18 or 28 per cent GST
making 3 to 5 per cent accumulation of input tax credit as the fabric or
processing job work attracts only 5 per cent GST.” He added that the service
tax has been increased 15 to 18 per cent and several services have been brought
under tax net under GST.
At yarn stage the actual drawback rate would work out to 2 to 2.5 per cent and
at grey fabric stage, the same would work out around 3 per cent while at
finished fabric, garments and madeups would work out to more than 5 per cent,
according to Nataraj.Stating that exports will suffer and dwindle down sharply due to reduction in
duty drawback rates, Nataraj urged the government to have a re-look in order to
protect the jobs of several million people working in the textile industry.He
urged the government “to extend the existing drawback benefits till the GST
anomalies and problems are fully sorted out and also the realistic drawback
rates refunding all blocked, embedded taxes and levies including accumulated input
tax credit at fabric stage are fully taken into consideration”.
Source: Business Today, India Saturday, 23 September 2017