The Association of Buying Agents for Textiles is seeking relief from service tax levied on them in the recent Budget.

This has so far been exempted from service tax, as it amounted to export of services and was earning foreign currency for the country, said M Anand, General Secretary of the association.

The order, which comes into effect from October 1, will have a far-reaching effect on the intermediaries as all the Indian subsidiaries and commission agents who facilitate supply of goods to their importers will bear the brunt. This will leave us “high and dry”, he said.

There are over 700 such agents across the country who play a vital role in garment exports as close to 80 per cent of the export business is generated through them.

They act as a liaison office between the exporters and the importers (in this case, various global apparel brands). According to V Elangovan, President of the association, India’s textile exports were at $40 billion in 2013, and out of this, $16 billion was from export of readymade garments. Majority of this $16 billion is facilitated by these agents.

On an annual basis, agents incur roughly ₹4,800 crore towards their cost of operations in India, and get them reimbursed by the importers.

Now, by the present amendment, the Government is trying to bring this ₹4,800 crore into the service tax net (12.36 per cent) and thereby will earn ₹593 crore.

“This will affect the competitiveness of the industry, and, hence, the overseas importers may shift their base to other Asian countries such as Bangladesh, Vietnam and Cambodia.

The association has submitted a memorandum to the Union Finance Ministry in this regard, and hopes to get out of the service tax net.

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