In the wake of Government of India’s decision to withdraw Merchandise Exports from India Scheme (MEIS) with retrospective effect from March 7, 2019 on garments and made-ups, exporters are requesting the government to make the decision applicable prospectively. The government has retrospectively withdrawn MEIS on HS code chapters 61, 62 and 63.
“The decision (to withdraw MEIS retrospectively) is very disturbing because we had taken the incentive into account in our cost and pricing of our offerings in exports. And we had already exported the goods. We have already booked orders by accounting 4 per cent in our costing as the scheme was supposed to continue till March 31, 2020. But now this sudden withdrawal is not understandable because normally the government always makes prospective modification if it wants to withdraw something and gives the trade a chance to survive,” KK Lalpuria, executive director and CEO, Indo Count Industries.
“Also, benefit under the scheme to refund state and central taxes and levies (RoSCTL) declared from March 7, 2019 has not been disbursed so far. So, there is a cashflow issue as well. In addition, we have paid income tax on this whole benefit. Further, we always work 6-8 months in advance for hedging our raw material and there are larger lead times for replenishment orders. So, we have to service the customers well and invest in R&D. So, the government should consider our humble request to make it prospective,” Lalpuria added.
The retrospective withdrawal of MEIS has come at a time when Indian home textile exporters are already facing tough situation in Europe and UK markets, whereas Pakistan and Bangladesh have duty advantage.
Explaining the predicament, Kewal Impex CEO Maulik Modi said, “MEIS was already there in the system. The government introduced RoSCTL with effect from March 7, 2019. At that time, it never said that MEIS will be removed and RoSCTL will be continued. Things were going smoothly and all of sudden, in August, the government said that after July 31 MEIS would not be given for HS code chapters 61, 62 and 63. Now, it is announced that the MEIS benefit which was utilised from March 7 till July 31, will also be taken back. Moreover, RoSCTL which was supposed to come at 8.2 per cent from March 7 has not been credited yet. Being in the industry for the last 25 years, I see there is a big scope for exports, but without incentives our industry cannot work. We are not in a position to quote the price right now.”
Value addition is much higher in made-ups and apparel sector, which results in employment generation on a large-scale. The retrospective withdrawal of MEIS takes away 4 per cent benefit from the value chain for a considerable period of 9-10 months, that too in an industry where margins are already thin. “If the government says that the benefit will stop prospectively, we will take up with the customers that we are not able to pass on the benefits which have been withdrawn but still have we will have loss of 3-6 months even if they were withdrawn prospectively as the orders have already been taken,” according to Amit Gupta of Trident Group.
“Industry is going through a tough time and the government needs to support us. We are one of the largest employment generators in the textile manufacturing value chain. We are also contributing a lot to the foreign exchanges. So, if these benefits are withdrawn it will impact directly and several companies may not be able to sustain,” feels Gupta.
The retrospective withdrawal of MEIS, along with non-distribution of benefits under RoSCTL has increased problems of home textiles exporters, who are already facing a stiff competition from countries like Bangladesh, Pakistan and Vietnam. Even if the benefit is withdrawn prospectively, exporters who have already booked orders for the coming months would face loss for the said orders. Hence, they are hoping that the government would review the announcement in the interest of the industry.
