The Association of Buying Agents for Textiles has submitted a memorandum to the Union Finance Ministry seeking relief from service tax levied on them in the recent Budget. The textile buying agents so far were exempted from service tax, as it amounted to export of services and were earning foreign currency for the country, said M Anand, General Secretary of the association.

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 ready made garments. Majority of this $16 billion is facilitated by these agents.

The order, comes into effect from October 1, has 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 them “high and dry”.

On an annual basis, agents incur roughly Rs.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 Rs.4,800 crore into the service tax net (12.36 per cent) and thereby will earn Rs.593 crore.

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