Exporters are exempted from all taxes, and the embedded tax through the process of sourcing raw materials to manufacturing is refunded to them. But the refund mechanism has never been without worries. Also, the Rebate of State and Central Taxes and Levies (RoSCTL) has not lived up to the good intentions of the government.
As per the new system changed in September last year, the exporters are issued scrips (like coupons) against the refund amount. The scrips are tradeable, meaning importers can buy them and pay duty. The intention of the government was to leave it to the market.
But Vimal Shah, president of Garment Exporters Association of Rajasthan, said, “RoSCTL scheme provides rebate against the taxes, levies, etc that are already paid by the exporters on the inputs. But the scrip system introduced last year is causing losses to the garment exporters.”
Jindal said importers buy the scrips at a discount, sometimes at 75% of the original value and the exporters are losing their refund money. “We want the government to rectify the system. It is causing huge losses to the garment exporters,” Shah added.
Earlier, the government used to refund these taxes and levies, but the process used to take time. With this mechanism, it is believed the exporters could get their taxes back by selling the scrips to importers who can use them to pay duty while bringing goods to the country. Vijay Jindal, member of Apparel Export Promotion Council, said, “These changes are acting against the government’s intention of making it easy for the exporters in getting their tax refunds back. Rather it helps the importers as they buy the scrips at a discount but take the full value of them. We want the Centre to change the refund mechanism.”
Some members of the association said the agents are manipulating the system.