AEPC Flays Move To Deny Duty Drawback Benefits

New Delhi, December 25: | Updated: Dec 26 2002, 05:30am hrs
The garment industry, which is already reeling under the impact of the quota restraints from industrialised countries, is facing a new problem at home. Tax authorities insist that it cannot claim deduction under Section 80-HHC of the Income Tax Act, 1961, unless export profits are declared in the returns, without taking the duty drawback element into account, according to Confederation of Indian Apparel Exporters.

In its pre-budget proposals to the government, the confederation says the tax authorities move is unjustified as duty drawback is an integral part of export profits. While computing the export profits as per the formula under the above section, the duty drawback aspect cannot be ignored if the profits turn negative. The confederation has urged the government to clarify the situation so that the exporters are not put to any hardship on this account.

Expressing concern over moves by some sections of the textile industry suggesting that knitted fabric, which is subjected to an optional levy of 12 per cent, be made compulsory, the confederation has pleaded that status quo be maintained in the interest of all-round development of the knitting and related knitting garment sector.

Customs authorities have started conducting enquiries to determine the present market value (PMV) in respect of readymade garments meant for export on grounds of over-invoicing the FoB price. Contesting this, the confederation asserts that no exporter is in a position to over-invoice the price as that would attract a higher duty in the quota countries such as the United States, European Union and Canada. Similar is the case with regard to the price quoted for exports to non-quota countries, which also levy high import duties, the confederation points out.

It has, therefore, suggested that exports to both quota and non-quota countries and to those undertaken by status holders be excluded from the purview of PMV enquiries. The status holders are export, trading, star trading and super star trading houses.

Going by the customs notification of April 22, 2002, import of sample fabric of total length up to 500 metres during one financial year is permitted.

However, the confederation considers this length to be insufficient to help exporters meet their buyers instructions for developing new samples. It has suggested that the government allow in each import consignment 50 meters of sample fabric per colour/per design duty free within the three per cent entitlement.

The confederation also suggests that the government consider including more items of tags, labels, printed bags, stickers, belts, buttons or hander and allow them duty free and licence free for bonafide garment exporters.