Under WTO rules, India cannot extend direct export sops anymore.
The government is working on a plan to extend the upgraded Rebate of State and Central Taxes and Levies scheme (RoSCTL) — that reimburses garments and made-up exporters all un-remitted input taxes paid at the State and Central levels — to all textile products.
This is being done to prepare the sector for an eventual withdrawal of the Merchandise Export Incentive Scheme (MEIS) that flouts global trade rules.
“The textile sector has long graduated out of the special dispensation that the WTO extends to vulnerable sectors or countries that need support by allowing them to extend export sops that are otherwise banned. If the MEIS is extended for a longer period to textile exporters and a WTO member files a dispute, there is no way India can defend itself. That is why there is a hurry to replace the scheme for the sector first before moving on to other sectors,” a government official told BusinessLine.
Under the popular MEIS, claimed by a bulk of garments and textiles exporters, the government gives incentives to exporters equivalent to about 4 per cent of their export value in the form of duty credit scrips that can be used to pay customs duties and are freely transferable.
Since it is a direct export subsidy, and the textile sector’s phase-out period for such subsidies ended in 2018, it would have to be withdrawn soon.
“The government has now decided to withdraw the MEIS scheme as soon as possible and extend the Rebate of State and Central Levies scheme to all textile sectors, including fibre, yarn and fabric,” the official said. But this will now probably happen after the general elections, he added.
Meanwhile, garments and made-ups manufacturers will be allowed to enjoy the benefits of both the RoSCTL and the MEIS till the latter is withdrawn as exports from the two sectors have taken a beating in the current year. “The Indian textile exporters have a cost disability of 15-20 per cent compared to their competitors because of high input costs. Letting them take advantage of two schemes can help them tide over the present low,” the official said.
The RoSCTL includes value-added tax on fuel used in transportation, captive power, farm sector, mandi tax, duty of electricity, stamp duty, embedded SGST and CGST paid on inputs and Central excise duty on fuel.
“Although the new scheme has been implemented this month for only a one-year period, the idea is to make it permanent and make it a replacement for the MEIS,” the official said.
Once the MEIS is withdrawn from the textiles sector, it would be taken away one by one from other sectors as well as India has moved above the threshold of a per capita gross national income of $1,000, which makes it ineligible to offer export sops to any sector.
“While for the textiles sector, there is no room for further extension of the implementation period beyond 2018 as exports officially crossed the threshold limit of 3.25 per cent of world exports in 2010 and the eight-year phase-out period is over, New Delhi is trying to bargain for a longer phaseout period for other sectors,” the official said.
Published On : 25-03-2019
Source : The Hindu BusinessLine
