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Focus

Budget Must Aim to Make Garments Units Exports Competitive & Profitable

SME WORLD Bureau
Feb 2011

According to Rakesh Vaid, President, GEA the basic objective of the budget should be to make exports competitive as well as profitable, as the rising raw material prices have been adversely affecting the export potential of garment exporters.

Indian Apparel Industry, one of the most dynamic sectors of the economy poised to continue to play the significant role in economic development. The Government of India has recognized the importance of this labour intensive industry as the focus area to meet the challenge of generating more employment during the Eleventh Plan period.

To achieve the desired objective of increased employment generation in the apparel industry, large capital investment will have to be made to generate the required employment during the Eleventh Plan period. The sustainable employment potential of the apparel industry will have to be enhanced by taking appropriate necessary action to encourage the required investment by providing a level playing field to garment exporters.

GEA, an apex body of garments exporters called for an overall reduction in interest rates and corporate tax rates, besides removal of anomalies in excise and custom duties to reverse the recent slowdown in garment export industry. As the international market, which was already highly competitive, has become tougher, GEA in its Pre-Budget recommendations has requested the Government to reduce the transaction cost and grant necessary fiscal and commercial relief for the garment sector of the Textile Industry to enable it to face increasing international competition.

GEA's recommendations for the Budget proposals

To hike duty drawback rates by 5 per cent by increasing the scope and coverage of duty drawback scheme so as to ensure full reimbursement of excise duties, custom duties, service tax, education cess and various state level taxes.
To provide adequate and need-based funds to exporters at reasonable rates of interest which should not exceed 7 per cent as applicable to agriculture sector and restore 4 per cent interest rate subvention on export credit.
To restore 100% exemption to export earnings under Section 80 HHC of Income Tax Act atleast for the next five years.
In view of acute power shortage, Government should encourage captive power generation by providing diesel at International prices and exempted from Excise Duty and Local Levies.
To exempt from Service Tax all the export related services to avoid blockage of capital of exporters, as the procedure for refund is time-consuming, resulting in unnecessary delays and harassment.
GEA would like the Government to implement GST (Goods & Service Tax), at the earliest and also to clarify how the GST mechanism will work for the exporters which are now enjoying various tax reimbursement such as duty drawback, advance authorization and advance licenses etc.
The Custom duty on import of textiles machinery, accessories and fabrics should be abolished allowing free import at nil rate.
Import duty on manmade fibres to be reduced to zero, so that the garment exporters can get cheaper man made fabrics available in the country for manufacture and export garments at more competitive prices.
The Government should also arrange refund of State Levies on exports, amounting to 6% of f.o.b. value.
To allow duty free import of Tailor Dummy with HS Code No.9618 0000 and Security Tag /Fish Hard Tag with HS Code No. 85437019.
Apart from taxation relief, GEA would expect the Government to reduce the transaction cost by simplifying administrative procedures by avoiding delays at customs clearance of goods and improving loading and unloading of cargo and infrastructure at ports.
Market Focus Product Scheme should be extended for exports to USA and EU-27 countries for at least one more year.

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