India’s garment industry suffocates under GST bottlenecks

HKL Magu

Apparel Export Promotion Council of India has sounded alarm on the continued decline in apparel production in India and said India won’t be able to meet the garment export target of $20 bln this year.

“If the capital blockage continues and the cost competitiveness of the industry is not restored, the slippage in exports will continue, with long term adverse impact on India’s positioning in this sector,” the council said.

Apparels are one of the country’s largest providers of organized employment, and provide livelihood to lakhs of families.

Apparel production has been on the decline since May last year due to lower export demand and tight working capital conditions.

“From a positive growth 1.3 % in April, the next month (May) saw a fall of 5%.In June the decline was 3.2 % while in July, it was 5.1 %.

“August, September, October, November and December recorded 6.4 %, 7.2 %, 11 %, 13.1 % and 13.5% dip respectively,” the AEPC said, quoting government figures.

This is partly due to the lower demand for Indian-made apparel in countries such as the US and the UK. Apparel exports from India fell 14% for January, hurting manufacturers and production.

In all, AEPC said India’s apparel production has fallen 10.4% in the first ten months of the current financial year compared to the same ten months of the previous year.

While poor export growth has not helped, neither has the added bureaucracy that has come with the introduction of the Goods & Services Tax in July.

HKL Magu, Chairman of the Apparel Export Promotion Council (AEPC) that the government is yet to give Rs 4,097 cr of tax refunds under GST back to the manufacturers.

“The Industry is suffering as their funds are blocked and they are unable to pay suppliers on time,” Magu said, adding that apparel makers are not able to get credit from textile suppliers.

“The biggest deterrent to the Industry’s sentiments has been the severe capital blockage due to the dual constraint of delays in RoSL disbursements and IGST refunds. Until the refunds start flowing, things will not improve,” he added.

He said the council has made several presentations to the Ministry of Textiles, Ministry of Commerce Drawback Committee, NITI Aaayog, Parliamentary Standing Committee etc. on ways to overcome the problems.

AEPC has also informed the Ministry of Commerce that on account of new taxes there is a shortfall of around 5% under GST and therefore several blocked and embedded taxes may be refunded through higher drawback and RoSL (Rebate of State Levies), along with refund of GST input tax credit (ITC).

AEPC said if the tax issues are sorted out, India can again become a world leader in apparel exports.