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Home / News / India /  Rebate scheme extension for apparel exporters brings much-needed clarity: Icra

The Union Cabinet's decision to continue with the Rebate of State and Central Taxes and Levies (RoSCTL) scheme on exports of apparel and made-ups till 31 March 2024 will provide much-needed clarity, particularly for exporters who are struggling to maintain their share in an intensely competitive global market, and enable them to effectively price their products, Icra Ltd said on Thursday.

The government on Wednesday decided to extend the RoSCTL scheme which had expired in December 2020. It was launched in March 2019 to replace the then-effective scheme for Rebate of State Levies (RoSL) and the Merchandise Exports from India Scheme (MEIS). While it was supposed to be superseded by the much-awaited Remission of Duties and Taxes on Export Products (RoDTEP) scheme from 1 January 2021 onwards, the rates and structure for RoDTEP had not been announced yet.

Uncertainty on the structure as well as rates of the export incentives had made it challenging for exporters to price their goods over the past six to seven months. Given the uncertainty, it appears that many players, particularly the larger ones, did not factor in export incentive benefits, or factor in the same at lower rates in the first half of 2021. “Such players could report an upside, with the change being implemented with retrospective effect. As per ICRA’s estimates, in the past, incentives for exporters of apparels and made-ups have typically been ~6-8% of export sales," the rating agency said in a statement.

Clarity on the scheme has brought in much-needed relief to Indian exporters of apparel and made-ups, said Jayanta Roy, senior vice president & group head, Corporate Sector Ratings at Icra, adding "this step would provide stability and enable them to effectively price their products without worrying about retrospective changes."

The trend in India’s apparel exports has not been much encouraging in recent years. In 2020, India’s apparel exports fell steeply by around 25% amid the pandemic impact, whereas the global apparel trade shrunk by around 13% during the year.

Over the past five years, India’s share in the global apparel trade has dropped to an estimated 3% in 2020, from 4% in 2015. In comparison, shares of some of the major competing nations such as Bangladesh and Vietnam have expanded to 6.8% and 7.4%, from 6.1% and 4.9% respectively, during the same period. External challenges for Indian textile exporters have also heightened with increased activities on several free trade agreements among the key trading nations, which have intensified competition from nations having a cost advantage over India.

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