In view of an adverse impact of the goods and services tax (GST) on exports — particularly in the handicrafts, apparel and carpet sectors — the government is looking at making certain concessions in rates and allowing additional input tax credits to the industry, including a likely reduction of rates on finished carpets and expanding the list of duty-free imports of essential embellishment to make them competitive in the international market.
The carpet industry had demanded the duty to be brought down from the existing 12% to 5% to make Indian carpets competitive internationally. The proposals are being worked out by the ministries of finance and textiles after a marathon meeting finance minister Piyush Goyal and textiles minister Smriti Irani had with representatives of various export promotion councils and industry captains last Sunday.
The J&K and Uttar Pradesh governments had made a strong case for concessions and the decision to reduce rates was on the table at least since last November.
The government is concerned over the fact that since October last year, exports of ready-made garments have significantly declined. It was found that the introduction of GST had “unintended consequence” of reducing tax refunds by 5-7% as compared to the pre-GST period, making Indian apparel uncompetitive in the international market, a top functionary privy to the meeting said.
More than Rs 5,700 crore of refunds are stuck due to procedural issues after implementation of GST, contributing to cost escalation and slowdown in exports. Soon after the meeting, the FM on Tuesday announced setting up of a fortnight-long special refund drive by the Central Board of Indirect Taxes and Customs from May 31 to June 14 to resolve the input tax credit- (ITC-) and integrated GST- related refunds.
The government is also looking at giving exporters input credit for certain embedded state and central levies for which no such provision is available at present.
(This article was originally published in The Times of India)