The Hindu Business Line : Textile traders upset over revised drawback rates

THE changes announced by the Revenue Department effective January 19, in less than three weeks since the phase-out of the quota regime, in the All Industry Rates of Duty Drawback (AIR of DBK), designed to remit the duties suffered on inputs of export products, had by and large upset the textile and clothing exporters.

A cross-section of the textile export industry, when contacted told Business Line here that as the Government has decided to discontinue the Duty Entitlement Passbook Scheme (DEPB) due to its WTO-incompatibility effective April 1 and merge it with the drawback scheme, the exercise for revised Drawback Schedule is still under way. Moreover, they contend that normally the changes in drawback rates or DEPB are announced following changes made in fiscal duties mainly in the Union Budget. Without waiting for both, the exercise for revised Drawback Schedule was undertaken as a special case and the revised rates were announced on the basis of certain broad parameters including the extant prices of inputs, the Standard Input Output Norms (SION) which are fixed by DGFT, share of imports in the total consumption of inputs and the applied rates of duty.

Officials in the Textile Ministry say that the main changes unveiled in the Drawback Schedule in respect of textile and handicraft sectors include that the product coverage has been extended by creating about 165 new entries in textile items, against 101 entries in the earlier schedule. New products included are wool tops, cotton yarn, acrylic yarn, viscose yarn, various blended yarn/fabrics, fishing nets and these entries currently are part of DEPB Schedule.

Second, the rates for most of the textile items have now been given in terms of per kg in lieu of earlier ad valorem rate/per sqm/per piece. This has prompted the Chairman, Apparel Export Promotion Council (AEPC), Mr A. Saktivel, to state that when inputs and consumables are taxed on value basis, refund of duties should also be value-based and not weight-based. The industry's understandable ire stems from the fear that it would be confronting problems at port level as Customs authorities might insist on exclusion of beads, sequins, and other embellishments trimming materials in the weight of the export product.

Third, the existing entries in the Drawback Schedule pertaining to garments have been created separately for each fibres i.e., garments made of (i) cotton, (ii) cotton and man-made fibre blend and (iii) man-made fibres. Separate AIR of DBK has been prescribed for these categories of garments on the basis of composition of textiles.

Fourth, the AIR of DBK for composite export articles would be available on the basis of rates of drawback admissible to various constituent materials of the composite articles according to net content of such materials on the basis of a self-declaration to be furnished by the exporter. Finally, the drawback rates on some of the handicraft items have been increased marginally while on few others such as art ware of brass and copper have been reduced.

Overall, industry sources contend that while the impact of changes in respect of wool, silk and man-made textile items might not be altogether unfavourable in view of some upward revisions in drawback rates, the changes in drawback rates would adversely affect cotton and blended textile items since the drawback rates towards excise component have been given only in respect of dyes and chemicals and packaging material. Besides, they say, the shift in policy of calculating the rates of duty drawback on actual basis in place of deemed basis would also affect the admissibility of the drawback rates. In sum, the changes might have "negative impact on the export efforts", they say.

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