The apparel export industry has asked the government to clear the confusion prevailing on the issue of minimum wages under code of wages for the garment industry. This has impacted the booking of export orders, and to restore the confidence of foreign buyers it is important that a suitable clarification is issued by the government. In the present stressful and challenging times, any additional burden on account of doubling the minimum wages from the present about Rs. 9,000/- per month to Rs. 18,000/- will make garment manufacturing unviable and unsustainable in future.
Further, AEPC has asked the Ministry of Finance for the refund of IGST paid on import of machinery used by the apparel exporters. After the implementation of GST from 1st July 2017, apparel exporters are required to pay IGST up to 18 per cent on assessable value plus BCD while clearing shipments of capital goods under EPCG. This incidence of a very high IGST without any corresponding relaxation for export obligation has rendered the EPCG scheme unattractive.
The only way for apparel exporters to claim IGST refund is through input tax credit but apparel exporters who import capital goods normally export 100 per cent of their products and doesn’t sell in the domestic market. Hence, issue of utilisation of input tax credit doesn’t arise for these exporters. On the contrary, domestic players who are importing capital goods are better placed as they have various opportunities to utilise input tax credit. Therefore, industry is demanding the Ministry to resolve the matter by taking up the matter with GST council to allow refund of IGST to exporters.
This will not only adversely affect the exports but will also lead to a fall in the employment generation in the sector. The garment exports during the month of July 2017 have already registered a negative growth of 11.86 per cent in dollar terms as against July 2016, and the growth trajectory of 31.72 per cent achieved during the month of April 2017 has now been limited to 5.94 per cent in the period April-July, 2017, with garment exports touching only $6183.35 mn. Hence, it is very important that govt. looks at this urgently.