Gujarat’s textile and garment exports have fallen by 30 per cent after the cut in incentives that came with the implementation of GST. Export incentives for cotton and polyester reduced roughly by four per cent. This makes products more expensive in the international market and reduces exporters’ competitiveness.

The situation with apparel exports is no different. Exporters used to get duty drawback of 7.5 per cent before GST implementation. This has been slashed to 2.5 per cent, due to which there is a significant impact on exports. As incentives have been cut, the prices of products have increased.

For apparel manufacturers, it was a double whammy, as some key global markets like UAE imposed VAT on apparel exports from India. With duty drawback slashed, exporters were already struggling to generate export volumes at competitive prices, and they now face a stiffer competition in these regions due to changes in tax rates.

Sri Lanka and Middle Eastern countries are some of the key markets for garment manufacturers from Gujarat. With a cut in duty drawback, there is stiff competition from the likes of Bangladesh and Vietnam, both of which get tax incentives in addition to export incentives. Besides, these countries are preferential importers for several global markets. Gujarat accounts for 12 per cent of apparels exported from India.