AFFECTED FLOWOutflow (subsidised)
ANNOUNCED AS TEMPORARYYes
Tax-based export incentive
A scheme called the Scheme for Rebate of State Levies on Export of Garments 2016 has been announced to provide a rebate of State Levies imposed on exports of garments. The Scheme will be applicable from 20 September 2016 for a period of 3 years. An official Notification was published by the Minsitry of Textiles on 12 August 2016 (No. 12020/03/2016-IT). The current Scheme was rescinded and a new Scheme with revised rates has been announced on 7 March 2019 (see related State Act).
The scheme aims to provide a rebate of the State Levies paid on exports of garments in addition to the rebate on Central Taxes that is provided by the Duty Drawback Scheme. The levies are understood to include State Value Added Taxes, Sales Tax on inputs, fuel, duty on electricity generation for the final product and the accumulated duty over the stages of production. According to the Press Release the tax rebate is expected to cost INR 5500 crore (USD 826.73 million)*.
The rebate rates notified will be calculated on Free on Board value of the exported goods.
Notification No.12020/03/2016-IT published on 13 August 2016 specifies the rebate rates for the exports of the said goods. Two rates have been specified, a lower rate if the fabric (including interlining) used in the production has been imported under the Special Advance Authorisation Scheme and a higher rate if not. The Advance Authorisation Scheme allows duty free imports of raw materials for manufacturing of export goods.
* INR to USD conversion as on 22 June 2016 - INR 67.50 / USD
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