Textile industry faces crunch as rebate scheme backlog hits Rs 16 billion

Industry body writes to the govt for immediate action to clear the dues, failing which hundreds of units would close down and lead to thousands of job losses in the country

The textile industry has alleged that around Rs 16 billion worth of payments to readymade garments alone, under the Remission of State Levies (ROSL) scheme, has not been cleared by the government. And, this delay is affecting their working capital and overall business.

The industry body representing textile units has sent a letter to the government requesting an immediate action to clear the dues, failing which hundreds of units would close down and lead to thousands of job losses in the country.

According to the industry, the government had allocated Rs 4 billion in 2016-17. The original allocation under ROSL of Rs 15.55 billion for 2017-18 was enhanced to Rs 18.55 billion in the revised estimates. For the year 2018-19, the ROSL allocation in the Union Budget was Rs 21.64 billion.

The amount allocated would not be sufficient for the requirements even at present. Besides, there has been a delay in payment; the ROSL amount was given to exporters only from March 2017 onwards. The concern for the industry is that it has been cleared for exports made only until May 2017, and some of the exporting units have received the ROSL amount only up to March 2017, said industry members.

For the readymade garment sector, the total due amount is Rs 23.45 billion after taking account of the revised estimates of Rs 18.55 billion for 2017-2018. The backlog for readymade garments between September 2016 and March 2018 would be around Rs 13.68 billion, and for the Tiruppur Knitwear Exports at around Rs 3.30 billion, according to industry sources.

"There is a heavy backlog and the exporting units which had actually planned their day-to-day operations and other financial commitments based on the ROSL amount have got affected significantly," said an industry representative from the Tiruppur Exporters Association. The amount allocated might not be enough to serve the current requirements, so the government needs to increase the allocation and disburse funds as early as possible to help the industry come out of its present financial crunch, said the organisation.

The rebate of state levies shall be understood to comprise value-added tax (VAT) on fuel used in the transport of raw materials, finished goods and factory workers, and VAT on fuel used in generation of captive power, Mandi tax on purchase of cotton, duty on electricity used in manufacture as accumulated from stage of cotton and man-made Fibre (MMF) till garment or made-up stage, stamp duties on export documents and state GST on inputs used in the production of cotton, and embedded SGST in purchases from unregistered dealers.

"Tiruppur exporting units, comprising small and medium enterprises, have been facing working capital issues due to the blockage of GST refund, including the ROSL amount. The association has been repeatedly making requisitions to the textile minister, textile secretary, and textile commissioner, for early clearing of the ROSL," said an official from the Tiruppur Exporters Association.

The government earlier merged two schemes, ROSL on export of garments and made-ups through the mechanism of rebate under the scheme of rebate of state levies on export of garments and made-ups. The ROSL scheme was announced as part of a special package to the apparel sector, and, subsequently, made-ups were also included in the scheme. The scheme came into effect from September 20, 2016. The ROSL rebate rate ranges from 2.65 per cent to 3.9 per cent depending on the description of goods. The same ROSL rebate rate was continued for three months from July 1, 2017 to September 30, 2017 after the implementation of GST on July 1, 2017. The ROSL rate was revised from October 1, 2017; for cotton T-shirts, it was revised from 3.5 per cent to 1.7 per cent.