Duty drawback sops to incentivise high-value garment exports

Government has increased the duty drawback of 3.2% to 4.7% (depending on the category) for exports of non-fabric inputs made from imported fabrics

The Centre has increased the duty drawback of 3.2 per cent to 4.7 per cent (depending on the category) for exports of non-fabric inputs made from imported fabrics under the Advance Authorisation Scheme.

This will help in export of high-value apparel made from the imported fabrics. The announcement, effective from the next month, is a part of the package announced by the commerce ministry.

The garment sector has welcomed the government's decision. Sectoral people said this would attract more exporting units to enhance manufacturing of the products. So far, this benefit was not available to garment exporters.

A senior knitwear industry executive in Tirupur said, "The garments produced out of specialty fabrics imported under this scheme will be competitive since the units are getting additional benefit through the duty drawback rate. This will also attract more exporting units to enhance manufacturing of the products using specialty fabrics which have a good market abroad."

Chandrima Chatterjee, advisor of the Apparel Export Promotion Council (AEPC), said AEPC had been requesting for consideration of this expansion in scope of duty drawback, the rationale being that for apparel made of imported fabric under the advance authorisation, there are still various other inputs which attract taxes, and the same get exported. Hence, by the rationale of "taxes should not be exported", the expansion in coverage of drawback is justified.

Duty-free import of fabric under the Special Advance Authorisation Scheme shall be allowed for export of articles of apparel and clothing accessories for export of items covered under Chapter 61 and 62, subject to the terms and conditions.

The authorisation shall be issued based on Standard Input Output Norms (SION) or prior fixation of Norms Committee. The authorisation shall be issued for the import of relevant fabrics including inter lining only as input. No other input, packing material, fuel, oil and catalyst shall be allowed for import under this authorisation.

Exporters shall be eligible for the All Industry Rate of Duty Drawback, for non fabric inputs, as determined by central government for this scheme.

Authorisation, and the fabric imported, shall be subject to actual user condition. The same shall be non-transferable even after completion of export obligation.

The fabric imported shall be subject to pre-import condition and it shall be physically incorporated in the export product (making normal allowance for wastage). Only physical exports shall fulfil the export obligation.