India’s Apparel Export Promotion Council (AEPC) has sought tax incentives such as uniformity in GST and enhanced interest subsidies to boost domestic manufacturing and India’s outbound shipments.
The Budget is scheduled to be presented on February 1. The AEPC urged the government to provide tax concessions to apparel manufacturers adopting Environmental, Social, and Corporate Governance (ESG) and other international quality standards and compliances. The council also sought budgetary support for the branding and marketing made-in-India products.
The council said interest equalization rates were revised downward from 3 to 2 percent for non-MSME (Micro, Small, and Medium Enterprises) manufacturer exporters under the interest equalization scheme on pre-and post-shipment export credit.
The high cost of capital has been a significant bottleneck for the exporting community. AEPC has requested the government to increase the rates under the scheme to 5 percent for all the apparel exporters,” it said, adding it will increase the apparel industry’s competitiveness in the international market and enable them to avail necessary working capital.
Regarding the Goods and Services Tax (GST), it said that a uniform tax of 5 percent only should be levied across the entire MMF (Man-Made Fibre) value chain (fiber, yarn, and fabric).
Currently, the council added that the MMF GST rate on fiber is 18 percent, yarn 12 percent, and fabric 5 percent, resulting in unutilized input credit and consequent liquidity issues for MSME units.
The operations involved in the garment export trade require various kinds of quality trimmings and embellishments (tags, labels, stickers, belts, buttons, linings, inter-linings, etc.) to ensure the desired functionality and aesthetics of garments in the global market. It suggested the government include trimmings and embellishments under Import of Goods at Concessional Rates (IGCR) duty rules.
Foreign buyers insist on maintaining consistency and quality and avoiding counterfeits to sustain their brand image. It said that any deviation in the specification and quality results in the rejection of the shipment.
Indian apparel exporters are constrained to use only those trimmings and embellishments that are pre-approved by the buyer, and these are mainly required to be sourced from overseas suppliers nominated by the garment buyers, the council argued.