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Leather exporters feel the GST bite

Our Bureau Chennai | Updated on January 10, 2018 Published on September 26, 2017

Delay in refunds, stiff competition affecting industry



The Council for Leather Exports (CLE) is hoping the Centre will extend full drawback benefits up to March 2018 and adjust imbalances in GST rates on leather inputs and goods to help the industry adapt to the new tax regime.

In the present format, CLE estimates that an additional ₹3,500 crore in working capital will be needed, as funds would be blocked for most exporters. Money is not available in the system as margins are low; exports have been stagnating in recent years, and banks will not make funds available on this scale under the circumstances, according to CLE.

With the government extending the deadline for filing GST returns to November 10 after GST kicked in on July 1, 2017, refunds are bound to be delayed, said Mukhtarul Amin, Chairman, CLE. With funds locked up, most exporters do not have access to additional working capital.

Exports have been stagnating at around $6 billion in recent years, and banks are reluctant to plough in additional working capital, he said.

He said the IGST on import of inputs and raw materials for making export products should be done away with. GST rates on finished leather and composition leather, jobwork, leather products and CETP services should be slashed, he said.

PR Aqeel Ahmed, Vice Chairman, CLE, said that more than 4.5 million people are employed in an industry that accounts for exports of about $5.6 billion, and is dominated by small players working on single-digit margins. Unless the issue is addressed on an urgent basis, a number of units could shut shop in the coming months.

Leather should be allowed Rebate of State Levies along the lines provided for textile, he said.

Indian leather export is losing out to competition from Bangladesh, Vietnam and Indonesia as costs are rising here. Strong production centres are also coming up in eastern Europe.

Against the backdrop of an overall slowdown, order books are dropping for exporters. The Centre has to support the transition to GST, he added.

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Published on September 26, 2017
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