Notwithstanding the sharp drop in exports, textile companies are expecting the government to refund ₹3,000-4,000 crore of GST levied on the shipments made since the implementation of GST.

The blockage of funds with the government and rising operational cost are expected to pull down exports by 10 per cent this fiscal, said Premal Udani, Chairman, Board of Trustees of Clothing Manufacturers Association of India (CMAI).

To facilitate exports, the government refunds embedded taxes through drawback rates which is currently fixed at 1.6 per cent. The industry has demanded that the rates be increased to 7 per cent given the high incidence of taxes, he added.

The Government cannot expect exporters to be competitive in global market after incurring such high levies, he said.

Exports fell four per cent in the financial year ended March to $16.7 billion, against $17.38 billion logged in same period last year. Going by the export trend in the first quarter of this fiscal, all indications are that it will fall by at least 10 per cent, he added.

Rahul Mehta, President, CMAI, said the increase in minimum support price for cotton will hit the industry further as 70 per cent of garment exported are cotton-based.

Cotton prices have gone up 20 per cent in last four months impacting the cost matrix of exporters, he said on the sidelines of an event to announce the 67th National Garment Fair in Mumbai between July 16 and 19.

The strong compounded annual growth of 10 per cent to $67 billion in domestic demand since 2005 is the only solace for garment companies. In contrast, the demand in the US, EU and Japan has slowed down due to weak economic conditions.

The unorganised apparel market accounts for 65 per cent of the overall domestic trade of $67 billion. Dominated by the ready-to-wear category at $56 billion, the domestic apparel market is expected to touch $160 billion by 2025, said Mehta.

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