Indian Cotton Oct Shipments Rises 63%, Y/Y, RCM Effect Yet To Be Seen

MUMBAI(Commoditiescontrol) – India cotton shipments for the month of October rose 63 percent, year on year basis, beginning the 2017/18 season on a stable note.

Shipments was 63 percent higher during the month of October to 0.89 lakh bales compared to same month last year at 0.55 lakh bales while it was marginally higher from 0.89 lakh bales during the month of September, 2017.

Major cotton was exported to Bangladesh at 0.64 lakh bales, claiming nearly 71% of the total export volume followed by Vietnam at 0.10 lakh bales (11%), Indonesia at 0.08 lakh bales (9%) and China at 0.03 lakh bales (3%). This could be said as a routine demand as the neighboring countries found it cheaper to import cotton from India compared to the season’s competitor US.

Now the Reverse Charge Mechanism (RCM) has been implemented whereby ginners procure raw cotton at 5% GST from farmers however will be unable to claim set off from exporters who would procure cotton bales at 0.01 percent GST.

This has created an impact on the working capital of both ginners and exporters as ginners have no other choice but to add the paid GST into the final cost of production.

As per trade sources, exporters have committed around 20-25 lakh bales for November to January shipment and in order to avoid default in commitments, they were purchasing cotton which included GST charges of 5% added in the total cost of production. Hence, there could be sluggishness in shipments for the month of November as exporters were facing difficulties to procure cotton.



Note: Data Collated from TextileBeacon

(By Commoditiescontrol Bureau; +91-22-40015534)