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Tuesday, June 25, 2024

Order down by 70 percent as Tamil Nadu traders worried about income tax on late payment

While exports are picking up, the Indian domestic textile market is in disarray as orders for the ready-made textiled have dropped by 70 per cent in the last two months. The Indian domestic market is larger than its export market.

Any slump in domestic sales has an adverse impact on the Indian textile industry. The trader blamed the central government’s amendment in the Income Tax Ac, 1961, where customers will have to repay the amount within 45 days.

The Centre amended Section 43B (h) of the Income Tax Act, 1961, to facilitate quick business debts by small and micro enterprises. Though the amendment was brought last year, it will come into effect from March 31. The amendment stated that if a trader obtains goods or credit from small and micro enterprises or MSME registrants, the amount must be repaid within 45 days. Otherwise, it will be treated as his income and they will have to pay 30 per cent of the income tax on it. This has created a major issue in the ready-made textile trade.

In Erode there are about 5,000 traders here excluding the Gani textile market traders. All of them buy fabric and manufacture it into ready-made textiles. An average of Rs 500 crore is being traded every month. Annually, trade of up to Rs 6,000 crore is done here. Orders come from other districts and states like Kerala, Andhra Pradesh, Karnataka, Bihar, Assam, etc. However, business has not been smooth for the past two months. Only 30 percent of the orders have come in January and February because many of the customers are unable to repay the debts within 45 days. They are starting to look for ready-made textile traders who will give them extra time.

Because this amendment has been brought only for small and micro industries, enterprises with turnover comes below Rs 50 crore. So customers are looking for medium enterprises that have a higher turnover of the limit. Small traders allege this amendment is meant to crush small and micro industries. They say this should be brought to all levels of industry. Otherwise, this amendment should be postponed for one year.”

Textile wholesalers have also reduced purchasing fabrics as orders have come down. I have ordered only 20 percent of the fabric in the last two months. They want the central government to change the limit from 45 days to 100 days. Or else it should be postponed for a year.

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