Sometimes the incentives announced for the exporters in haste turn out to be counter-productive for them as has happened in India where the Rebate of State and Central Taxes and Levies launched in 2021 is eroding the margins of Indian apparel exporters.
The RoSCTL scheme provides rebates against the taxes and levies already paid by exporters on inputs. The apparel exporters converted this rebate into convertible scrips that they started selling the importers. The importers in turn were entitled to pay duties through these scrips instead of cash. In the initial period the exporters disposed of these scrips at a discount of three percent. Now there are more scrips than the demand of importers. The discount rate has gone up to 20 percent.
This has eroded the exporters’ benefits by 20 percent. The exporters warn that Indian apparel may lose competitiveness as a result of ever-increasing discount rates on these tradable scrips. They contend that the very purpose of the scheme has been defeated. Instead, it is benefiting importers. Based on estimates, of the total $16 billion in apparel exports, about 5 per cent (roughly Rs 6,000 crore Indian rupee) is in the form of reimbursement. At a discount of 20-25 per cent on this, there is a direct hit of about Rs 1,500 crore on the margins of companies operating in the apparel sector. The Apparel exporters have appealed to the Indian government to address this issue.
