Education Tax on duty-free: RMG export to India from Bangladesh

(BSS, Dhaka); RMG exporters to India have complained of a number of impediments severely impacting the supply of 8.0 million pieces of duty-free garments started under SAFTA framework from the middle of last year.

Some exporters in writing informed the Export Promotion Bureau (EPB) of the snags recently, official sources here said adding the agency in turn has passed the complaints to the Ministry of Commerce seeking solution of the problems.

These exporters said India is collecting VAT and special VAT from what it declared duty free import in addition to education taxes on two counts and wondered how the merchandise remain duty free true to its purpose.

Under the circumstances, the EPB sources said exporters who initially showed great enthusiasm to RMG exports to India have already lost interest while new exporters are coming only in small numbers.

The situation indicates that the annual 8.0 million pieces export quota may thus remain largely unutilized and even come to slow death if the snags continue. The Indian government agreed to offer this special privilege to Bangladesh to help narrow its staggering trade imbalance with India.

RMG export figures from January 1 to February 23 showed that the so-called duty free export to India stood at around 1.56 lakhs during this time compared to 18.53 lakhs over the seven months from June to December.

In fact the snags hit the exports as soon as it started picking up following the Indian government application of internal duties; which altogether stood at 18 percent even minus the 10 percent duty exempted at import stage.

The sources said, last year exporters had applied for duty free quota certificates of 36.5 lakh pieces of garments but in reality collected only half of it as the Indian importers slowly become reluctant to secure supply having high internal duty on them. Sri Lanka witnessed similar snags, said an exporter questioning the Indian inward looking mind-frame. '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 is only slowing down as only few new exporters are taking interest to export RMG to India while they have ready market in Europe and America, said a business source.

The Indian government is reportedly saying as information suggest, it has only removed the basic import duty at 10 percent on RMG import from Bangladesh. But other internal duties have remained in place.

Duties which the Indian government is collecting on Bangladesh apparels include central government VAT, Special central government SCVAT, secondary education tax (ETS) and higher secondary education tax (ETHS)- altogether 18 percent, exporters said.

"BGMEA president Anwarul Alam Chowdhury blamed poor negotiating capacity of the Bangladesh for the problem saying it should have made sure that duty free means no duty at all.

Now it appears that most duties have remain in place, he said. .

Exporters have also listed many non-tariff barriers. They alleged that customs officials on the Indian side raise question 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 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 some shortcoming.

Consequently the exporters have to pay demurrage charge bringing inconveniences to both exporters and importers, they said. Exporters said buyers at Hariyana, Mumbai, Kolkata and especially in northeastern states of India are taking big interest in knitwear, trousers, ladies shirts and pants made in Bangladesh.

But the question remains whether the Indian buyers can take this opportunity while the exporters are wondering whether the duty free scheme under SAFTA arrangement can over live the troubles.