The Hindu Business Line : Leather exporters flay cut in duty drawback rates

THE Council for Leather Exports (CLE) has decided to take up strongly with the Ministry of Finance the sharp cut in the All Industry Rates of Duty Drawback (DBK) for leather and leather products, announced recently.

The new rates have come down by 20 per cent for many items such as leather footwear, footwear uppers, industrial leather gloves and leather sandals. In the case of certain other items such as leather bags other leather gloves, the cut has been to the extent of 10 per cent.

Seeking a re-think on the subject, the leather industry has sought a "realistic fixation" of drawback rates.

A senior level CLE team led by its chairman, Mr Rafeeque Ahmed, has planned to meet concerned officials in both finance and commerce early next week, essentially to understand the calculations made by the Department of Revenue to arrive at the slashed drawback rates for leather products.

It is learnt that the Revenue Department had not chosen to hold any pre-revision consultations with the industry, as is always the normal practice.

Mr Ahmed told Business Line from his Chennai office that

drastic and "unjustified" reduction in the DBK rates for major items such as footwear, footwear uppers, gloves, bags etc will have a serious impact on the exports.

He said the industry was shocked at the sudden announcement, coming just weeks before a fresh Union Budget. Such revision in rates is traditionally taken up as an annual post-Budget exercise, and industry is quite puzzled over the timing of the announcement, particularly when there were no changes in the customs and excise duties in the Budget unveiled in July 2004. "Above all, the current revision was not expected when the review exercise for next year is currently on."

He felt the reduction had no rationale, as no relief were announced in the Union Budget of 2004-05. On the contrary, we were expecting an upward revision in rates, factoring in the education cess and service tax, he pointed out. "Besides, the cost data the Council carefully compiled and submitted to the Department of Revenue justified higher rates and ceilings over the prevailing DBK rates and ceilings."

Mr Ahmed said even if the duty-free import facility of 3 per cent earlier extended to the leather sector in September 2004 was factored in, the overall cut in rates could not have been more than 1 per cent. "And that is why, we want to understand the calculations for arriving at the rates announced."

He, however, conceded that there has been a marginal increase in rates for a few items such as lining leather, leather sandal uppers, rubber canvas footwear etc, which do not have a significant share in the overall exports. The rates remain unchanged for some items such as finished leather, leather garments, small leather goods etc.

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