Hinting that the government's decision to withdraw application of duty drawback scheme to exports of cotton yarn may give an impression of incentive to exporters, the All India Exporters Chamber (AIEC) has appealed for reconsideration of the decision.
In an official release issued by AIEC, Preeti Sheth, president of the chamber stated that the duty drawback scheme is a time tested scheme aimed mainly at reimbursing the incidence of customs and excise duties levied at the input stage of the product concerned.
"Further it is not an export subsidy contingent in law or in fact upon export performance. The WTO agreement on subsidies and countervailing measures (ASCM) clearly permits exemption or remission of prior stage cumulative indirect taxes or import charges levied on inputs that are consumed in the production of the export product," she said.
The release further stated that by proposing withdrawal of the duty drawback on cotton yarn when no changes in the import and excise duties on textile products had taken place in the Union Budget 2010-2011, the government is implicitly admitting that it is an incentive given for exports and not a scheme meant for reimbursing central indirect taxes suffered at the input stage in the manufacturing process. "The country will open itself to fresh anti subsidy proceedings on almost all products of export interest including home textiles and garments whose rates are much higher than cotton yarn," said Sheth.
The government has entrusted the work of determination of drawback rates to an independent committee which calls for data from all concerned, examines its veracity, verifies the inputs consumed by factory visits and discusses the matter with customs officials at ports and then arrives at the rate. These rates are renewed and revised every year. However, according to AIEC, withdrawal of duty drawback rates on cotton yarn is discriminatory as all other products of exports are eligible for the refunds and implies that the product does not suffer any incidence of either excise or custom duty or service tax.
According to Sheth, the Committee which determines the Drawback rates has already undertaken an exercise to review the rates of all industry duty drawback for all commodities and is expected to give its report within two months. "Instead of waiting for the report the government has unilaterally and without going into the merits of the case, withdrawn the duty drawback on yarn exports," she added.