Positive impact of GST is yet to be felt by garment industry: AEPC

The Dollar Business Bureau

Exporters body Apparel Export Promotion Council (AEPC) said on Friday that the impact of Goods and Services Tax (GST) is stressful on apparel exporters, especially small and medium businesses, due to higher transaction cost and increase in working capital.

“The positive impact of GST is yet to be felt by the garment industry, where input costs have not come down. Overall effect of GST on apparel exporters, especially small and medium exporters is burdensome and stressful due to substantial increase of working capital and higher transaction cost,” said Ashok G Rajani, Chairman, AEPC.

“MSMEs have to recruit services of qualified CA’s to be able to manage GST payments and refunds. It has not only impacted the production of apparel adversely but has also led to pressure on margins for exporters due to lowering of drawback rates,” he said.

Regarding such issues regarding the GST concerning the apparel exporters, a delegation from AEPC made a point-wise presentation to the Parliamentary Standing Committee, said a statement from AEPC.

In its presentation to Naresh Gujral, Chairman, Parliamentary Standing Committee (Rajya Sabha) on Commerce, AEPC informed him about the difficulties which smaller exporters are facing after the rollout of the new GST regime.

“We have informed the Parliamentary Standing Committee that under the prevailing circumstances there is a strong likelihood of exports from India dipping in the coming days, as the global garment industry is very competitive,” Rajani said.

In addition, competing countries like Bangladesh and Vietnam have cost advantages on account of preferential trade agreements with major export markets, and buyers are moving to these destinations for sourcing. This could have a cascading effect on the job scenario as exporters will be forced to shed jobs,” he added.

The Committee is keenly observing the impact of GST and is working on removing the impediments faced by the Industry, he informed. 

In its presentation, AEPC has asked the Committee for early consideration of refund of blocked/embedded taxes on purchase of Ginned Cotton (agricultural inputs like agricultural machinery, seeds, fertilisers, power, diesel etc), and miscellaneous Central/State levies like power cross subsidy, etc, stamp duty, property tax and others levies for refund under Rebate of State Levies (RoSL).

Full reimbursement taxes through drawback and RoSL needs to be done at the earliest, so that peak season orders can be booked at better rates, it said.

The exporters’ body also drew attention of the Committee members towards the issue of extension of exemption of IGST on import under Export Promotion Capital Goods (EPCG) or Advance Authorization Scheme from March 31, 2018 to December 31, 2018 to provide a longer window for investment decisions. Enhancement of Merchandise Exports from India Scheme (MEIS) to 5% for reimbursing increase in cost of working capital and higher transaction cost. 

It has also asked for allowing utilisation of scrips, issued under MEIS, for use in payment of CGST, SGST and IGST to ease the challenges being faced to working capital blockage and other procedural issues.

To arrest the decline in exports, AEPC has requested for competitive exchange rate and rupee appreciation be stabilised to protect the interest of exporters.