India's handicrafts exporters welcome increase in drawback duty rates

Sachin Manawaria | The Dollar Business The Jodhpur Handicraft Exporters’ Association (JHEA) has welcomed the recent increase in drawback duty, saying that it could help boost India’s overall handicrafts exports. In a recent notification, the Department of Revenue increased the drawback duty rates for agarbathi (incense), wooden frames, tableware and kitchenware of wood, wood marquetry, artware of wood, embroidery of silk, handicraft/artware of Iron & Steel, handicrafts/artware of stainless steel, handcut crystal glassware, musical instruments and lamps. The move comes after India’s handicrafts industry that is centered in Rajasthan said that returns had declined due to higher input and logistics costs. Industry representatives say that they face growing competition from countries like Indonesia and China, and the government’s decision to increase the input tax refunds (duty drawback) paid to them by the government will improve competitiveness of Indian handicraft items in the international market. Nirmal Bhandari, President of Jodhpur Handicraft Exporters’ Association told The Dollar Business, “This is a welcome move by the Indian government to encourage the exports of handicraft industry from India to major markets of the world.” However, Bhandari reiterated that the imposition of VAT (Value Added Tax) is hurting the industry adversely and may slowdown growth in handicrafts exports. He said, “The 5% VAT on handicraft sector is happening for the first time in 22 years and only in Rajasthan. This may unnecessarily reduce the growth prospects of handicraft sector in years to come.” JHEA has urged the Rajasthan government to abolish the VAT immediately.

Pic. Source -
Export Promotion Council for Handicrafts (EPCH)

  After growing 17.5% y/y to around $3.8 billion in FY2013-14, India is targeting to increase handicrafts exports to around $4.47 billion in FY2014-15. USA, UK and UAE are major destinations for India’s handicrafts exports. According to industry estimates, Jodhpur in Rajasthan accounts for around 20% of India’s total handicrafts exports and Jaipur for around 15%. Moreover, Jodhpur is also a major export point for handicraft items from other states.

This article was published on December 3, 2014.