FinMin mulls tax refund benefit on cotton yarn exports

The Finance Ministry is considering the restoration of a tax refund benefit for cotton yarn exports, which was suspended in April, 2010, to discourage overseas shipments amid high domestic prices.

The situation has since changed drastically, as prices have declined sharply. Prices of cotton have declined to Rs 150 per kg now from over Rs 170 a kg in August last year.

Recently, the Textiles Ministry urged the Finance Ministry to restore the 6% Duty Drawback Scheme on exports of the natural fibre yarn.

"The Finance Ministry is actively working on the proposal and soon we expect something in this regard," an official told PTI.

In April last year, the government withdrew the 4% incentive on cotton yarn exports with a view to cool prices in the domestic market.

Commerce and Industry Minister Anand Sharma, who has been given the additional charge of the Textiles Ministry, had said he would recommend restoration of the benefit with effect from April 1, 2011, to the Finance Ministry.

Following a reduction in prices of cotton yarn, the government on April 1 this year removed the restrictions on cotton yarn exports.

In the 2010-11 fiscal, the government had imposed a cap of 720 million kilograms on yarn shipments.

The move came under fire from spinning mills across the country, which closed their operations for a day to protest against the withdrawal of incentives on cotton yarn exports by the government.

Recently, the government restored the Duty Entitlement Pass Book (DEPB) scheme on cotton yarn with retrospective effect from April, 2011.

Under the scheme, exporters are given a refund of the tax incidence on the import content of their export products.