The Indian government has extended the Rebate of State and Central Taxes and Levies (RoSCTL) scheme for apparel and home textile exporters by three months to December 31, so the mechanism does not face a disruption while a long-term plan is being formulated. According to a Mint report on September 28, the government is drafting a proposal to extend it for another five years.

Key Points

  • The government has extended RoSCTL to December 31, keeping current rebate rates and rules unchanged, while preparing a five-year extension plan.
  • In FY26, rebates total about ₹1,001 billion, covering more than 444 regions and over 15,400 exporters, with rebate rates ranging from 1.7% to 8.2%.
  • The FY27 budget allocation is ₹500 billion; India's textile industry directly employs over 4.5 million people, with an export target of $100 billion by 2030.

What Is RoSCTL
Launched in March 2019, the scheme refunds state taxes, central taxes, duties, and cess already paid on exported apparel and home textile products that cannot be recovered through other channels, covering apparel, garment, and home textile exporters, with a significant share of beneficiaries being micro, small, and medium enterprises (MSMEs). Depending on the product category, the refundable amount ranges from 1.7% to 8.2%. Officials emphasize that it is not a direct export subsidy but a return of domestic taxes that would otherwise be trapped in export costs, preventing these costs from being passed into overseas selling prices and weakening the price competitiveness of Indian products.

Why the Three-Month Extension Stirs the Industry
Textile and apparel orders are often scheduled months in advance, and too short a policy window affects order-taking, pricing, and investment decisions. Industry executives argue that RoSCTL should have a longer policy cycle, on the grounds that it is a tax refund rather than an export incentive. Extending the validity period provides exporters with clearer policy expectations and greater visibility when quoting prices abroad.

Textile Exports and Fiscal Input
Government data show that India's apparel exports were $35.49 billion in 2019, fell to $29.61 billion in 2020, rebounded to $41.47 billion in 2021, then declined to $38.31 billion and $34.23 billion in 2022 and 2023, respectively, before recovering to $36.71 billion and $36.95 billion in 2024 and 2025. The volatile recovery shows that Indian producers face multiple competitive pressures from low-cost manufacturing destinations, geopolitical tensions, supply chain disruptions, and rising input and import costs.

On the fiscal side, RoSCTL spending was ₹91.76 billion in FY22, fell to ₹76.59 billion in FY23, and has since risen continuously: ₹80.33 billion in FY24, ₹85.65 billion in FY25, and ₹100.1 billion in FY26. The FY27 budget allocation is ₹50 billion.

Prabhu Dhamodharan, convenor of the Indian Textile Federation (ITF), said that with U.S. and EU apparel imports contracting 5% to 8% year-on-year, capturing market share is crucial; in highly price-sensitive competition, RoSCTL refunds unrefunded embedded taxes, helping Indian exports compete on a level playing field, while every additional apparel order creates multiplier effects in fabrics, processing, yarn, and fiber, and supports large-scale employment.

For exporters, the greatest significance of the short-term extension is that the mechanism will not be interrupted; however, the mismatch between order cycles and policy cycles remains. If the five-year extension proposal is implemented, it will directly affect the certainty of Indian apparel exporters' future pricing and capacity planning.

Source: Mint Explainer | Why tax refunds matter for Indian apparel exports | Mint · Originally published on 2026-10-01