Apparel Exporters Request Tax Incentives In Budget To Enhance Manufacturing

The apparel exporters body, AEPC, asked that the Budget should provide tax concessions to apparel manufacturers who adopt international quality standards and compliances like ESG

The Apparel Export Promotion Council (AEPC) on Wednesday urged for the upcoming Budget to include tax incentives like uniformity in GST and improved interest subsidies to push domestic manufacturing and India’s outbound shipments. 

The apparel exporters body, AEPC, asked that the Budget should provide tax concessions to apparel manufacturers who adopt international quality standards and compliances like ESG, reported PTI. 

The association asked budgetary support for the branding and marketing of made-in-India products. Notably, the Budget is set to be presented by the finance minister, Nirmala Sitharaman, on February 1, 2024. The council further stated that interest equalisation rates were also changed from 3 to 2 per cent for non-MSME (Micro, Small and Medium Enterprises) manufacturer exporters on pre and post-shipment export credit. 

The increased cost of capital has been a major issue for the exporters, the body noted. It stated that they have sought the government to hike the rates under the scheme to 5 per cent for all apparel exporters. This will boost the apparel industry’s competitiveness in the global market and allow to access the needed working capital. 

About the Goods and Services Tax (GST), the association said that a stable tax of 5 per cent should be imposed across the whole Man-Made Fibre (MMF) value chain, which includes fibre, yarn, and fabric. Notably, the current GST rate on fibre is 18 per cent, 12 per cent on yarn, and 5 per cent on fabric. This has led to unutilised input credit and frequent liquidity concerns for the MSMEs, the council said. 

The exporters body also suggested that the government should include trimmings and embellishments under the Import of Goods at Concessional Rates (IGCR) duty rules. It noted that the garment export trade involves several kinds of quality trimmings and embellishments to make sure the garments produced have the desired aesthetics in the global market. To maintain the brand image, foreign buyers demand consistency and quality in the products and avoid using counterfeits, it added. Any departure from the standards lead to the shipments being rejected.

Therefore, Indian apparel exporters are bound to use only such quality trimmings and establishments, which have been pre-approved by the buyers and need to be mostly sourced from global suppliers chosen by the garment buyers themselves. Currently, certain trims and embellishment products are not included in duty exemption. 

AEPC also submitted a list of items not permitted currently, like draw card, metal tab/stopper/clip, velcro tape, leather badge, D-ring, etc, and urged for these items to be included in the duty exemption list. 

The council also argued that minimum wastage at the rate of 10 per cent should be permitted under the IGCR rules for importing trimmings and accessories by an official notification. This would help the apparel exporters give their utilisation details on time and get the bond executed at the customs release. 

Mithileshwar Thakur, Secretary General, AEPC, noted, “We will look forward to the response of the government on the suggestions made by AEPC, which have been made after wider industry consultations.”