Exports are expected to shrink in October after several months of increase, with exporters blaming issues related to the implementation of goods and services tax (GST) as well as front-loading of shipments in September to avail of higher duty drawback rates, which are meant to be refunds for tax payments.
Exports had appeared to be back on track, registering a 26 per cent rise in September, the highest in six months.
Data is due to be officially released in a day or two but sources told TOI that labour-intensive sectors such as textiles have been the worst performers. For cotton and viscose textiles, the duty drawback rates and refund of state levies (ROSL), which were in the range of 11-13 per cent, has now come down by 8-9 percentage points from October.
Garment manufacturers are also complaining of widespread loss of orders as buyers, including some of the top global brands, are preferring to source products from Vietnam and Bangladesh, which have cheaper labour but also enjoy preferential access to the US and European markets. While there has been discussion on restoring the rates, the government is yet to notify the changes.
Over the last two months, the government has sought to fix the glitches including offering a special dispensation to exporters to ensure that their funds do not get locked up. In addition, a new tool to enable merchant exporters, who source from manufacturers and export, has also been put in place but it is suffering from initial hiccups, which the revenue department is trying to fix.
Source :  The Times of India