I am glad to inform you that once again there is good news on the export front with data showing a double digit growth of 10.3% in August 2017. It is encouraging to note that textiles is also one of the sectors which has shown positive growth during August 2017. Exports which had made a recovery in the last 12 months had dropped to an eight month low in July. The fall in exports during July had been attributed to the rupee appreciation and the introduction of Goods & Service Tax (GST). But now things look bright and upbeat. The latest data of the Ministry shows that exports of Man-made fibre (MMF) textiles was to the tune of US$ 1487.73 million during the period April-June 2017-18 as compared to US$ 1424.98 million of the same period the previous year registering a growth of 4.40%. This clearly indicates that the export scenario is steadily on the path of improvement and hopefully this trend will continue for the months to come. The encouraging news is that except for yarn which showed a decline of 1.84%, all the other products i.e. fabrics, made-ups and fibre witnessed growth of 7%, 6% and over 12% respectively. The US was the top most market for exports of MMF textiles followed by Turkey and UAE ranked third. I am optimistic that exports of MMF textiles will further recover in the days to come however it is unlikely that the target will be achieved.
Since its implementation in July the Goods and Services Tax has had mixed impact. The MMF textile industry has been hit hard due to the highrates of GST. In this context I have urged the government to reduce GST on man-made fibre and yarn to 12% from the present 18% since higher levy of GST will coerce Indian producers to source yarn and fabrics at a cheaper rate from China and Indonesia. I have also requested the Finance Minister, Shri Arun Jaitley, Textile Minister, Smt. Smriti Irani, Textile Secretary, Shri Anant Kumar Singh and Revenue Secretary Dr. Hasmukh Adhia to look into the matter as it is hurting the small fabric manufacturers in power loom, knitting and processing segments. It also prevents seamless flow of input tax credit thereby breaking the whole value chain.
The GST Council's move to slash the rate on job work like weaving, cutting, knitting and embroidery to 5% from 18% as decided earlier is a welcome move and offers a big breather to small job work manufacturers in all segments which will allow free flow of business across the entire Textile value chain.
As you are aware, supplies of goods and services for exports under the GST regime have been categorized as “Zero Rated Supply” implying that goods can be exported under Bond or LUT (Letter of Undertaking) without payment of IGST (Integrated GST) followed by claim of refund of unutilized input tax credit or on payment of IGST with provision for refund of the tax paid. You may be aware that Merchant exporters cannot get goods from the manufacturers without payment of GST for exports under Bond/LUT, since there is no enabling document prescribed so far by the Government under which goods can be cleared by a manufacturer without charging IGST meant for exports by a merchant exporter against Bond/LUT. In the absence of such a provision, the manufacturers charge GST on the goods supplied by him to the merchant exporter for exports under Bond/LUT. While merchant exporters are eligible to take ITC of the GST paid to the manufacturers and claim refund after exports, the requirement of paying the GST first and claiming refund subsequently lead to blockage of funds.
I have informed the Government that in the erstwhile Central Excise regime, there was a facility under which a merchant exporter who has executed a Bond (B-1 Bond) was provided with C.T.1 certificates. The manufacturers supplied the goods without charging Central Excise duty to the merchant exporters against the C.T.1 certificates. I have requested the Government to recommend to the GST Council to introduce similar facility (enabling document which can be given by the merchant exporters to the manufacturers) so that the merchant exporters exporting under Bond/LUT can get GST free goods from the manufacturers for exports. I have also requested to the Government for an exemption to those exporters holding a valid membership with an Export Promotion Council from furnishing Bank Guarantees.
It is my sincere request to the Government to extend the Rebate of State Levies (ROSL) Scheme to the exports of entire MMF Textile Value chain especially to yarn and fabrics so that MMF Textile exporters can avail the benefit. This will create new jobs, attract investments and increase exports.
I have also brought to the notice of the Government, the issue of not allowing refund of accumulated input tax credit under GST for Textiles Sector as it has affected the entire weaving, processing, embroidery and job works segments also, which are the weakest segment in the textile value chain. In the present GST regime, forgoing the accumulated input tax credit has created a huge loss to the MMF Textile Industry and has indirectly added to the cost of product being sold. This has further resulted in making MMF fabrics becoming uncompetitive, and also affected the domestic fabrics production. I proposed that Accumulated Input Tax Credit should be refunded to weavers and other segments in the entire textile value chain that pays Input Tax Credit.
There are reports regarding the discontinuation of the Duty Drawback Scheme from the end of September 30th, 2017. The above decision, if taken, would aggravate the situation for the textiles exporters who are already reeling under the combined impact of a slowdown in major markets and rising input costs. My earnest request to the Government is for an extension of the Duty Drawback Scheme to boost exports of MMF Textiles and make it competitive in the International Market since majority of our MMF Textile exporters operate under the Drawback scheme. In the interest of the Country’s exports, I request the Government to continue with the scheme without any major changes till an alternative scheme is put in place. I look forward to the Government for its continued support and co-operation so that exports of Synthetic textiles can grow and achieve its true potential.
I am glad to inform you that the Council has successfully organized participation of its member companies in the 49th Federal Textile Trade Fair for Apparel & Textiles – TEXTILLEGPROM held in Moscow, Russia during 29th August – 1st September 2017. The Fair was jointly organized with FICCI and 45 member companies participated in the Fair. Indian companies had displayed in a specially demarcated area named “India Pavilion” which was inaugurated jointly by Shri Rudrappa Manappa Lamani, Hon’ble Textile Minister of Karnataka, Government of Karnataka, Shri Anant Kumar Singh, Secretary, Ministry of Textiles, Government of India, HE Shri Pankaj Saran, Ambassador, Republic of India in the Russian Federation and Mr. Alexander A. Kruglik, CEO of Yarmarka Ltd. The Fair helped Indian companies establish contacts, receive trade enquiries, etc. Initial reports suggest that around US$ 10 million worth of business is under negotiation. I would like to take this opportunity to thank the Hon’ble Textile Minister of Karnataka and the Secretary Textiles for inaugurating the India Pavilion and interacting with the participants. I would also like to thank Ambassador, Embassy of India, Moscow and the CEO of Yarmarka. I also express my gratitude to the entire team of the Embassy of India, Moscow and the organisers for their active support and guidance in making the Fair a success.
I would once again like to remind members who have not renewed their membership to do so at the earliest to continue receiving our services uninterrupted.
With warm regards,
SRI NARAIN AGGARWAL
20th Sep, 2017