AEPC urges Govt to address embedded taxes issue before GST Council meet

The Dollar Business Bureau

Ahead of the GST Council’s meeting on Friday, Apparel Export Promotion Council (AEPC) have urged the government to address the refund of embedded taxes on exports, including the levies on cotton, electricity, input tax credit restrictions for man-made fibres used in textiles and purchases made from unregistered dealers.

The GST Council would take decisions on the IGST refunds at its Friday meeting in New Delhi, Sushil Kumar Modi, its Head of Group of Ministers (GoM) has said on Wednesday. 

As per an Industry representation, Middle East, South Asian and African countries have emerged as a significant market for Indian readymade garments and since lot of orders were already booked before the introduction of GST, the curtailment in duty drawback will adversely affect the exports, AEPC said in a statement.

The Industry has also requested for the reinstatement of the scope of transaction for Merchandise Exports from India Scheme (MEIS) scrip to facilitate the exporters to make payments of necessary duties and taxes through the scrip transactions as was permitted prior to GST regime, it said.

Ashok G Rajani, Chairman AEPC said, “In the absence of encouraging drawback rates, exports will further witness a sharp decline just ahead of the peak festival season when the Industry was expecting a recovery. It is our humble submission to the concerned ministries to review the issue of embedded taxes and allow its refund through the drawback route.”

“Apparel exporters have already been hit hard by an appreciating rupee and the non-refund of embedded taxes have put a tremendous pressure on their working capital,” he added.

Rajani further said that the instance of new levies like intra company stock transfers, GST on job work, etc imposed in the GST regime have led to cost escalation for exporters in this transitory phase. So it is requested that Government look at ways to addresses the issue of reimbursement of embedded taxes presently not reimbursed under rebate of state levies and (duty) drawback schemes which would provide a respite to the industry. 

AEPC has been in constant consultation with Commerce and Textile ministries along with Niti Aayog on the issue of restoration of old duty drawback rates. The council has made a presentation to Amitabh Kant, CEO, Niti Aayog, apprising him about the various issues which the garment Industry is currently grappling with.