In a set back to exporters in sectors like leather, textiles and sports, the government today decided to reduce duty drawbacks, tax refund, by up to 30 per cent.
The new rates will be effective from September 20, the Central Board of Excise and Customs (CBEC) said in a notification.
Duty drawback, refund of import duties on raw materials used in exports, for cotton garments has been reduced to 7.5 per cent against the present rate of 8.8 per cent.
For blended garments, containing cotton and manmade fibre, the revised drawback rate is 8.6 per cent, down from 9.8 per cent.
"The drawback rates have been determined on the basis of certain broad parameters, like the prevailing prices of inputs...And the incidence of service tax," the CBEC said.
Upset over the sharp cuts in refund rates, the Apparel Export Promotion Council Chairman Premal Udani has shot off a protest letter to Finance Minister Pranab Mukherjee.
"Recession for readymade garment sector is far from over. The industry is reeling under unprecedented price rise of its basic materials like raw cotton, cotton yarns and fabrics. A contraction of exports means loss of jobs," he has said.
Duty drawback has been reduced in other sectors also.
For leather and leather articles, the rate has been reduced by 5-15 per cent, in bicycle and sports goods, 9-20 per cent and articles of iron and steel by 25-30 per cent.
In case of stainless steel utensils and cutlery, the refund rate has been slashed from 12.5 per cent to 8.8 per cent.
Although, the country's exports have risen by 28.6 per cent between April-August this fiscal, certain segments like garments, handicrafts, handloom and carpets, are yet to pick up from the setback received during the global downturn of 2008-09.