The Indian Government recently announced a major revision to the India duty drawback schedule. This update, issued by the Department of Revenue, Ministry of Finance, introduces a significant increase in rates for several key products. Specifically, this represents the first major revision in over three years, as the previous update occurred in January 2020. Consequently, the new rates and value caps aim to provide much-needed support to the textile and apparel sectors.
Enhanced Rates for T-shirts and Babies’ Garments
The latest India duty drawback notification provides a substantial uplift for knitwear exporters. For instance, cotton T-shirts now benefit from a drawback rate of 3.1 per cent, up from 2.1 per cent previously. Additionally, rates for man-made T-shirts increased by 0.5 per cent. Babies’ garments made of cotton and blended fabrics also saw a slight increase. Therefore, these changes directly enhance the competitiveness of Indian apparel in the global market.
Significant Revision in Value Caps per Unit
Beyond the percentage rates, the government introduced a major revision in the drawback value caps. For babies’ garments, the cap rose dramatically to Rs 29.4 from the earlier Rs 13. Furthermore, the cap for blended babies’ garments more than doubled, moving from Rs 6 to Rs 12.5. K.M. Subramanian, President of the Tirupur Exporters Association (TEA), welcomed the move. He noted that the association had actively appealed for these upward revisions to support the knitwear garment industry.
Understanding the New Material Definitions
The notification provides clear definitions for blended and pure fabrics within Chapters 60 to 63. Specifically, a blend containing cotton or wool with man-made fibre must have a man-made fibre content between 15 per cent and 85 per cent by weight. Conversely, garments classified as pure cotton, wool, silk, or man-made fibre must contain 85 per cent or more of that respective fibre. Consequently, exporters must ensure their material compositions align with these definitions to claim the correct India duty drawback benefits.
Implementation and Operational Impact
These revisions came into effect on 30 October 2023. Because the update followed a long hiatus, it provides a timely incentive for the external sector amidst global trade challenges. Furthermore, the increased liquidity from these drawbacks will likely bolster manufacturing and production. As a result, the resilient financial push from the Department of Revenue helps give more thrust to the apparel economy. Therefore, businesses should immediately review their shipping bills to ensure they reflect the updated drawback schedule.
