AEPC demands refund of IGST on apparel machinery import

The Dollar Business Bureau

Exporters’ body Apparel Export Promotion Council (AEPC) has asked the Ministry of Finance for the refund of Integrated Goods and Service Tax (IGST) paid on the import of machinery used by apparel manufacturer exporters.

AEPC, in a letter written to Ministry of Finance, has stated that after the implementation of GST from July 1, 2017, apparel exporters are required to pay IGST up to 18% on assessable value plus basic customs duty (BCD) while clearing shipments of capital goods under the Export Promotion Capital Goods (EPCG) scheme.

“The incidence of a very high IGST without any corresponding relaxation for export obligation has rendered the EPCG scheme unattractive,” AEPC said in a statement.

In the letter written to GK Pillai, Chairman of the Drawback Committee, AEPC Chairman Ashok G Rajani has highlighted the anomalous situation which has emerged after the implementation of GST.

The only way for apparel exporters to claim IGST refund is through input tax credit but apparel exporters who import capital goods normally export 100% of their products and doesn’t sell their products in the domestic market. Hence, issue of utilisation of input tax credit doesn’t arise for these exporters, the letter stated.

On the contrary, domestic players who are importing capital goods are better placed as they have various opportunities to utilise input tax credit, it added.

Talking about the issue, Rajani said, “During pre-GST regime apparel exporters were availing benefit of EPCG scheme where exporters were allowed to import capital goods without paying any import duty. The scheme was very popular amongst apparel exporters and encouraged many of them to invest in new units or go for expansion. But after the implementation of GST, there has been no clarity on the refund proceeds of IGST.”

“The working capital requirement of the exporters have gone up drastically due to the high rate of IGST which has not only added to the cost of production but have created a glaring anomaly by making domestic operations attractive compared to exports. Therefore, we have requested the ministry to resolve the matter by taking up the matter with GST council to allow refund of IGST to exporters,” he said.

AEPC has informed the ministry that refund mechanism of input tax credit on account of IGST has become a matter of serious concern as there is no clarity on the refund process and therefore for creating a positive eco system of investment, expansion, employment and export, it is important that Government intervenes in this matter and provide assistance to the exporters.