India charges 18pc internal taxes on 'duty-free' RMG from Bangladesh
Saturday, 7 March 2009
Apparel exporters have complained of a number of impediments severely impacting on duty-free supply of 8.0 million pieces of garments to India started under the SAFTA framework from the middle of last year, reports BSS.
Some exporters in writing informed the Export Promotion Bureau (EPB) of the snags recently, official sources said adding that the EPB in turn passed the complaints over to the Ministry of Commerce seeking solution to the problems.
The exporters said India is collecting VAT and special VAT from what it declared duty-free in addition to education taxes on two counts.
In fact, the snags hit the exports as soon as it started picking up, following the Indian government's application of internal duties; which altogether stood at 18 per cent even after deducting the 10 per cent duty exempted at the import stage.
Under the circumstances, the EPB sources said the exporters, who initially showed great enthusiasm in exporting RMG to India have already lost interest while new exporters are coming only in small numbers.
The situation indicates the annual export quota of 8.0 million pieces of garments may thus remain largely unutilised if the snags continue. The Indian government agreed to offer this special privilege to Bangladesh to help narrow its staggering trade imbalance with the country.
According to the RMG export figures from January 1 to February 23 last, the so-called duty-free export to India stood at around 156 thousand (1.56 lakh) pieces during the period compared to 1.853 million pieces over the seven months from June to December last.
The sources said, last year exporters had applied for duty-free quota certificates for 3.65 million pieces of garments, but in reality collected only a half of it as the Indian importers slowly became reluctant to secure supply because of the high internal duty on them.
Sri Lanka witnessed similar snags, said an exporter.
'If you are not opening your mind, no duty-free arrangement will work,' said an exporter explaining the situation.
So the new export initiatives under the scheme are only slowing down as only few new exporters are taking interest in exporting RMG to India while they have ready market in Europe and America, said a business source.
The Indian government is reportedly saying that it has only removed the basic import duty of 10 per cent on RMG import from Bangladesh. But other internal duties have remained in place.
Duties which the Indian government is collecting on Bangladesh's apparels include central government VAT, Special central government VAT (SCVAT), secondary education tax (ETS) and higher secondary education tax (ETHS)- altogether 18 per cent, exporters said.
'BGMEA President Anwarul Alam Chowdhury blamed poor negotiating capacity of Bangladesh for the problem saying that it should have made sure duty-free means no duty at all.
Now it appears that most duties have remain in place, he added.
Exporters have also listed many non-tariff barriers. They alleged that customs officials on the Indian side raise questions on the credibility of invoice value relating to export documents and often apply duty several times higher than the real value.
Very often they keep trucks loaded with export consignment stranded at the check-post unattended for hours and exporters have to pay additional charges on a hourly basis.
Indian government officials handling duty-free export, moreover, create unnecessary problems looking for small faults with export documents and sending it back to Dhaka for correction if they find any shortcoming.
Consequently the exporters have to pay demurrage charge causing inconveniences to both exporters and importers, they said.
Exporters said buyers at Hariyana, Mumbai, Kolkata and especially in northeastern states of India are taking much interest in knitwear, trousers, ladies' shirts and pants made in Bangladesh.
Some exporters in writing informed the Export Promotion Bureau (EPB) of the snags recently, official sources said adding that the EPB in turn passed the complaints over to the Ministry of Commerce seeking solution to the problems.
The exporters said India is collecting VAT and special VAT from what it declared duty-free in addition to education taxes on two counts.
In fact, the snags hit the exports as soon as it started picking up, following the Indian government's application of internal duties; which altogether stood at 18 per cent even after deducting the 10 per cent duty exempted at the import stage.
Under the circumstances, the EPB sources said the exporters, who initially showed great enthusiasm in exporting RMG to India have already lost interest while new exporters are coming only in small numbers.
The situation indicates the annual export quota of 8.0 million pieces of garments may thus remain largely unutilised if the snags continue. The Indian government agreed to offer this special privilege to Bangladesh to help narrow its staggering trade imbalance with the country.
According to the RMG export figures from January 1 to February 23 last, the so-called duty-free export to India stood at around 156 thousand (1.56 lakh) pieces during the period compared to 1.853 million pieces over the seven months from June to December last.
The sources said, last year exporters had applied for duty-free quota certificates for 3.65 million pieces of garments, but in reality collected only a half of it as the Indian importers slowly became reluctant to secure supply because of the high internal duty on them.
Sri Lanka witnessed similar snags, said an exporter.
'If you are not opening your mind, no duty-free arrangement will work,' said an exporter explaining the situation.
So the new export initiatives under the scheme are only slowing down as only few new exporters are taking interest in exporting RMG to India while they have ready market in Europe and America, said a business source.
The Indian government is reportedly saying that it has only removed the basic import duty of 10 per cent on RMG import from Bangladesh. But other internal duties have remained in place.
Duties which the Indian government is collecting on Bangladesh's apparels include central government VAT, Special central government VAT (SCVAT), secondary education tax (ETS) and higher secondary education tax (ETHS)- altogether 18 per cent, exporters said.
'BGMEA President Anwarul Alam Chowdhury blamed poor negotiating capacity of Bangladesh for the problem saying that it should have made sure duty-free means no duty at all.
Now it appears that most duties have remain in place, he added.
Exporters have also listed many non-tariff barriers. They alleged that customs officials on the Indian side raise questions on the credibility of invoice value relating to export documents and often apply duty several times higher than the real value.
Very often they keep trucks loaded with export consignment stranded at the check-post unattended for hours and exporters have to pay additional charges on a hourly basis.
Indian government officials handling duty-free export, moreover, create unnecessary problems looking for small faults with export documents and sending it back to Dhaka for correction if they find any shortcoming.
Consequently the exporters have to pay demurrage charge causing inconveniences to both exporters and importers, they said.
Exporters said buyers at Hariyana, Mumbai, Kolkata and especially in northeastern states of India are taking much interest in knitwear, trousers, ladies' shirts and pants made in Bangladesh.