Financial Daily
from THE HINDU group of publications

Wednesday, October 31, 2001



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Revenue Dept move irks textile exporters

G. Srinivasan

NEW DELHI, Oct. 30

THE Textile Ministry has taken up with the Revenue Department that the latter's discontinuation of the benefit of brand rate of drawback on textile export products, which had suffered the excise duty incidence, should not have prospective effect.

Official sources told Business Line here that while DEPB (Duty Exemption Passbook Scheme) was introduced in 1997 for enabling the exporters to get refund of the customs duty on the inputs used in the export product, the Revenue Department clarified subse quently towards the end of 1997 itself that all exports under DEPB scheme could also apply for Brand rate of Drawback (DBK) for the excise duty paid on the inputs used in the manufacture of the product exported.

However, exporters felt let down when for the last few months the applications filed for the fixation of brand rates on exports made under DEPB-cum-DBK scheme are getting unduly delayed. Sources said that exporters have been ``informally informed'' by th e concerned staff of the revenue wing that brand rate of drawback would no longer be available on exports under DEPB scheme.

This was corroborated when the Revenue Department at long last issued a circular on July 6, 2001 to the effect that the benefit of brand rate of drawback on export products which had suffered the excise duty incidence has been disallowed.

What exacerbated the woes of the exporters is that the Revenue department is applying the withdrawal of the benefit of brand rate of drawback to all pending cases even prior to July 6 and is even toying with the proposition to recover the amount where b rand rate of drawback was earlier allowed.

Sources contend that even the office of DGFT (Directorate General of Foreign Trade) clarified that ever since the advent of the DEPB scheme, additional duty of customs (including countervailing duty) was never taken into account for fixation of DEPB rate s and refund of such duty has been allowed through grand rate of drawback for non-Modvatable products.

Meanwhile, the Rajasthan Textile Mills Association (RTMA) representing 36 member mills of the State, said in a separate memorandum to the Union Finance Minister, Mr Yashwant Sinha, that though there are several means of availing exemption on excise duty on inputs, where the manufacturer-exporter is in a position to prove that the relief has not been availed of in any manner whatsoever, the Brand rates of drawback is the only option available to him.

The exhaustive statement, the manufacturing formula and the duty paying documents that are submitted along with the application for fixing the rates would establish that the inputs have suffered the excise duty burden of which no relief has been taken. A s such, RTMA noted, that it is unable to understand the apprehension of the revenue department.

RTMA's view is that it not ``aggrieved by the whole of the July 6, 2001 order - only with the portion that stops processing the past claims of relief of input stage excise duty burden on the processed fabrics.'' It further adds that while the DEPB credit only gave relief of customs duty, that for excise duty is pending.

``It is a substantial amount, forming roughly 8 to 9 per cent of the value of the export goods and its non-receipt not only annuls the profit margin on exports, but in several cases, results in losses,'' RTMA said.

Sources said the issue was discussed in the inter-ministerial meeting chaired by the Textile Secretary, Mr Anil Kumar, on July 11 where it was agreed that the Revenue Department circular of July 6, 2001 would not be given any prospective effect. This was also agreed to in the meeting of official group on growth in textiles held in August 8, 2001 but afterwards the revenue department clarified that its July 6, 2001 circular would have prospective effect and the issue about recovery is still under conside ration.

As exporters factor in the various benefits available to them before exporting products, the abrupt end to any such benefits causes losses, besides giving rise to the possibility that some of the export contracts not reaching shipment, thereby affecting foreign exchange earnings.

It is in this light that the Textile Ministry pleads that brand rate of drawback be disbursed to exporters for exports made prior to July 6, 2001 and no recovery be effected for already disbursed amounts.

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