Textile exporters bat for fine tuning of RoSCTL scheme to retain edge

The discount on tradeable scrips has gone up from 3% to about 20%, benefitting importers who are taking undue advantage at the cost of exporters, says industry

The Indian textile industry will rapidly lose its global export competitiveness if imbalances in the Rebate of State and Central Taxes and Levies (RoSCTL) scheme are not addressed immediately, said Apparel Export Promotion Council (AEPC).

RoCTL was launched in 2021 with the intention of making India’s textile industry competitive and strengthening its exports. However, the scheme in its current form is eroding the export margins of the domestic textile industry, AEPC said in a statement.

The RoSCTL scheme provides rebate against the taxes and levies already paid by exporters on inputs. This rebate has been converted into tradeable scrips that exporters can sell scrips to importers who, in turn, can pay import duty with these scrips instead of paying import duty in cash.

“While it was in discount earlier also, now the discount has gone up from 3 per cent to about 20 per cent. This discounting of scrips benefits importers, who are taking undue advantage at the cost of exporters,” said Vijay Jindal, Member, Export Promotion, AEPC, and President, Garment Exporters and Manufacturers Association (GEMA).

The council said in a statement that though the scheme was launched with the aim of making India’s textile industry export-competitive, these changes are acting against the government’s goal of benefitting exporters, and are instead benefitting importers. “This defeats the very purpose and intent of this entire scheme of promoting the government’s stated policy of ‘Make in India,” a statement said.

Based on estimates, of the total $16 billion in apparel exports, about 5 per cent (roughly Rs 6,000 crore) is in the form of reimbursement. At a broader level, given a discount of 20-25 per cent on this, there is a direct hit of about Rs 1,500 crore on the feeble margins of companies operating in the apparel sector, it added.

“At present, demand for such scrips is very low as exporters are finding it difficult to find enough importers who can buy the scrips obtained under the RoSCTL scheme. Lack of demand means that importers offer to buy scrips only at a steep discount of up to 20 per cent. If not addressed, India may lose its edge in global textile markets,” said  Harish Ahuja, Executive Member.