Goverment’s delayed refund of taxes on inputs to hometextile exporters has put their working capital cycle out of gear and consequently, leading to liquidity crunch. A leading hometextile exporter has said that around Rs 100-150 crore is locked up due to non-payment of dues by the government on time.
Hometextile manufacturers like other manufacturers have to pay tax on the input while buying the raw materials. While manufacturers catering to domestic market can set off these taxes on tax collected, exporters cannot do so as there is no tax on exports. Instead they get refund from the government which is not coming on time.
Usually the government tend to hold back the refund towards the end of the financial year (for about 3-4 months) but this year the problem of delayed payment is faced throughout the year starting from April 2017. This has put additional burden on their working capital needs while they are facing additional problem of subdued demand in the US market. Though, the industry doesn’t know the exact reasons for the delayed payment, it believes that the temporary phenomenon will be sorted out soon.
Delayed refund by the government has come as double whammy for the exporters who face problem on export front due to hardening of rupee vis-a-vis dollar. Further, demand for bath linen is showing poor growth in US market which has added to their cup of woes.