India's apparel exporters lose competitiveness

By

Isabelle Crossley

Published
Nov 22, 2017

Apparel exporters are currently losing competitiveness by around nine percent in export markets as other countries expand through government incentives and Indian garment exporters are again calling for changes to the GST.

On November 21, Anil Buchasia, the Chairman of the Apparel Export Promotion Council's export promotion committee, said: “We have suggested an alternative mechanism for reimbursements of central and state levies. We have also urged the government that in addition to the GST credit, the various blocked and embedded taxes should be refunded at the earliest.” According to Buchasia, the garment apparel sector is “not in a position to bear further losses” and that, if no relief is granted by the GST Council, the sector will be “forced to shed jobs”.

Garment exporters are also continuing to demand more favourable tax rates because, under the previous Value Added Tax (VAT) regime, they were relying on greater financial incentives to export garments. “The export promotion benefits that we used to get were to the tune of 11.93 percent in [the] pre-GST regime while the same now stands at three percent,” said Buchasia.

The Pakistani Government recently rolled out a new wave of initiatives for apparel exporters and other countries such as Ethiopia are also increasing their garment production for international brands. This year PVH (suppliers to Calvin Klein, Tommy Hilfiger, etc) Velocity Apparelz Companies (Zara, Leivs, etc), and Jiangsu Sunshine Group (Armani and Hugo Boss) all set up garment production factories in Ethiopia and many Indian exports fear losing clients to the country.

In this way, as new players are expanding their presence in the apparel production and export sector, things could prove still harder for Indian garment exporters. However, after making some GST rate changes last week, the GST Council looks reluctant to budge on the issue.