Ready-made garments export under scanner for tax scheme misuse

Export of ready-made garments has come under the scanner of central revenue intelligence officials for alleged misuse of a government facility to reimburse taxes incurred in manufacturing of exported goods.
Ready-made garments have traditionally been among the evasion-prone commodities. Some instances of alleged misuse of the government's duty drawback scheme by some ready-made garments exporters have been spotted by the officials and are being looked into, official sources said.
The duty drawback scheme is aimed at promoting export by compensating all duties or taxes embedded in cost of manufacture of exported goods.
The exporters have been allegedly misusing the scheme as there is difficulty in ascertaining the market value of the ready-made garments being exported. An exporter may quote higher price on a low quality ready-made garments to claim higher reimbursement, the sources said, explaining the reason behind such evasion.

Though there are value caps, which basically meant that an exporter cannot get more than a certain percentage irrespective of the value they declare, there have been many instances of the exporters selling such goods below the declared prices thus getting much higher drawback than what was justified or due, they said.
Finance Ministry officials said more attention was being paid to this sector so as to prevent any misuse of the duty drawback scheme.
Officials in the Directorate of Revenue Intelligence, a lead agency to check smuggling and customs duty frauds, said they were taking required measure to check such fraud by claiming higher drawback on low-priced ready made garments.

The government notify all India rates of duty drawback for a large number of export products every year.