In a significant move to bolster the textile sector, the Union Cabinet, led by Prime Minister Narendra Modi, has given the nod for the continuation of the Scheme for Rebate of State and Central Taxes and Levies (RoSCTL) for the export of Apparel/Garments and Made-ups until March 31, 2026. This extension, spanning two years, is expected to provide a stable policy regime crucial for long-term trade planning, especially in the textiles sector, known for advance orders and extended delivery timelines.
The decision to extend RoSCTL is rooted in the goal of ensuring predictability and stability in the policy regime. The textile industry, characterized by its reliance on long-term planning, will benefit from this extended continuity. Stability in policy is deemed essential to foster an environment where businesses can make informed decisions, particularly in an industry where orders are often placed well in advance.
Removing Tax Burdens for a Level Playing Field:
The RoSCTL extension seeks to alleviate the burden of taxes and levies, promoting a level playing field on the principle that ‘goods are exported and not domestic taxes.’ This move aims to enhance the competitiveness of garments and made-ups sectors in the global market by making these products cost-competitive and adhering to the principle of zero-rated export.
Evolution of RoSCTL:
Initially approved by the Union Cabinet until March 31, 2020, RoSCTL received further approval for continuation until March 31, 2024. The current extension until March 31, 2026, is anticipated to significantly contribute to the export competitiveness of garments and made-ups, embracing the concept of zero-rated export. It's important to note that other textile products (excluding Chapter 61, 62, and 63) not covered under RoSCTL are eligible to avail benefits under RoDTEP along with other products.
Objective of the Scheme:
The primary objective of RoSCTL is to compensate for State and Central Taxes and Levies, along with the Duty Drawback Scheme, on the export of apparel, garments, and made-ups. Aligned with internationally acceptable principles, the scheme emphasizes that taxes and duties should not be exported, ensuring a level playing field for international exports. The rebate covers not only indirect taxes on inputs but also other un-refunded State and Central taxes and levies.
Components of Rebate:
The rebate of State Taxes and Levies includes VAT on various inputs like fuel used in transportation, captive power, farm sector, mandi tax, duty of electricity, stamp duty on export documents, and embedded SGST on inputs. Similarly, the rebate of Central Taxes and Levies comprises central excise duty on fuel used in transportation, embedded CGST, and Compensation Cess on inputs like pesticides, fertilizer, purchases from unregistered dealers, and coal used in electricity production.
RoSCTL has played a pivotal role in enhancing the competitiveness of Indian exports in the apparel and made-ups segments, which are crucial and labor-intensive elements of the textile value chain.
