In a major relief for exporters of garments and made-ups, the Union Cabinet has approved the continuation of Rebate of State and Central taxes and Levies (RoSCTL) scheme till March 31, 2024 with the same rates as notified earlier by Ministry of Textiles.

“The extension of the scheme for almost three years provides stability and predictability, which augurs very well for the long-term contracts thereby ensuring additional investment in the segment creating new employment opportunities in the sector,” said A Sakthivel, President, FIEO.

It will help increase competitiveness of Indian apparels and made-ups, especially against countries like Vietnam, Bangladesh and Cambodia, that have tariff advantage on account of LDC status or owing to effective free trade agreements, he added.

Made-ups include items such as bed sheets, curtains, pillow-covers and towels.

Other textile products, which are not covered under the RoSCTL, shall be eligible to avail the benefits, under the input duty remission scheme RoDTEP, along with other products as finalised by Department of Commerce from the dates which shall be notified in this regard, an official release stated.

Under RoSCTL, exporters are refunded the embedded taxes and levies contained in the exported product through a duty credit scrip of an equal value that exporters can use to pay basic customs duty for the import of equipment, machinery or any other input.

Rate of rebate

The Textile Ministry had fixed a maximum rate of rebate for apparel at 6.05 per cent while for made-ups, it was up to 8.2 per cent.

The government was initially considering merging RoSCTL with the new input duty remission scheme RoDTEP scheme but there was a lot of uncertainty on what the rates of refunds would be. The delay in announcement of RoDTEP rates was also a cause of worry.

The decision to continue RoSCTL will help check the declining trend being witnessed in apparel exports, according to the Apparel Export Promotion Council. India’s apparel exports have been losing market share to competitors. It fell 20.8 per cent in one year from $15.5 billion in 2019-20 to $12.28 billion in 2020-21.

“The encouragement given to the textile sector, which directly employs 45 million people, most of them being women, will benefit a much larger population and will be more inclusive in nature,” the AEPC statement added.

Embedded taxes

Some of the embedded taxes that do not get refunded under other schemes include Central and State taxes, duties & cesses on fuel used for transportation of goods, generation of power and for the farm sector, mandi tax, duty on electricity charges at all levels of the production chain, stamp duty, coal cess and GST paid on inputs such as pesticides and fertilisers.

“Just one year after the launch of RoSCTL the pandemic set in and it has been felt that there is a need to provide some stable policy regime for the exporters. In the textiles industry, buyer places long-term orders and exporters have to chalk out their activities well in advance, it is important that the policy regime regarding export for these products should be stable. Keeping in view the same, the Ministry of Textiles has decided to continue the scheme of RoSCTL up to 31st March, 2024 independently as a separate scheme,” the government release added.

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