Apparel Exports is Facing 9% Decline in Profitability Post GST: AEPC

Apparel exporters are losing competitiveness by around 9 per cent in export markets after the implementation of GST and want a higher reimbursement of central and state levies to stall the continuing decline in exports.

"Post GST, there is an erosion of competitiveness by around 9 per cent for garment exports. Although we have a GST refund now, there was no vat (value added tax) on our materials earlier," Apparel Export Promotion Council's export promotion committee Chairman Anil Buchasia stated while talking to media.

"The export promotion benefits that we used to get were to the tune of 11.93 per cent in pre-GST regime while the same now stands at 3 per cent."

The demand for a higher reimbursement of central and state levies has come after a 39 per cent decline of apparel exports for October. For July-October, there has been a drastic fall of 5.94 per cent in overall exports of apparels from India, he said.

The decline was mainly on account of sharp reductions in the effective drawbacks and rebate on state levies, he added.

Under drawback, exporters get the reimbursement of duties they have paid on the imported items used in the finished goods.

Buchasia said the drawback mechanism, prior to Goods and Services Tax, reimbursed both the customs duties and domestic taxes like central excise and service tax. But after GST, the drawback rates are now only reimbursing the customs duties. For other duties, the argument is that those would be available as part of the credit chain.

"We have suggested an alternative mechanism for reimbursements of central and state levies. We have also urged the government that in addition to the GST credit, the various blocked and embedded taxes should be refunded at the earliest," Buchasia said.

According to him, the industry was "not in a position to bear further losses" and in the absence of policy incentives the sector would be "forced to shed jobs".