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Garment exporters want duty credit scrip of 5% & separate chapter for exports in banking sector

Shri Anand Sharma, the Union Minister for Commerce & Industry Chaired the Board of Trade meeting held on 27th August 2013 to listen and gather the concerns of the Industry captains and devise measure to boost exports thereof.

Chairman AEPC in his statement released to the press stated that : “The garment industry could achieve US $ 12.92 bn exports in 2012-13 & modest 13% growth in April – July, 2013 due to Policy Support given by the Government. Support like duty credit scrip at the rate of 5%, increasing the support under MAI, implementing the gold card scheme, separate chapter for getting export credit for the banking sector at fixed rate of 7.4% and Market Linked Focus Product scheme may be increased to from 2% to 3% and newer countries to be added and currency swap to explore the possibility of using local currency for trade with major trading partners. As well as, changes in service tax, income tax and labour laws as per the industry need are the thrust areas which have potential of boosting the apparel trade, if met.”

Shri HKL Magu Senior Vice Chairman, Apparel Export Promotion Council (AEPC)

Shri HKL Magu
Senior Vice Chairman, Apparel Export Promotion Council (AEPC)

Shri H K L Magu, Senior Vice Chairman, Apparel Export Promotion Council (AEPC) made the detailed submission and highlighted the issues and concerns of the apparel sector. Shri Magu at the onset thanked Minister for enhancing the interest subvention from 2% to 3% in Readymade Garment Sector. He then gave the details of the apparel export scenario and highlighted the benefits that are announced by Government for the benefits of apparel exporters.

On behalf of the garment Industry Shri Magu laid before Shri Sharma the demands and concerns of apparel exporters during the BOT meeting.

  • Enlargement of the garment export basket by manufacturing garments (Knitted and woven) from fabrics which are not widely available in India – Issuance of duty credit scrip (offsetting custom duties) on import of specialty fabrics at the rate of 5% for the export performance in the year 2012-13 and in the entire 12th five year plan.
  • Higher and assured three years direct financing to Apparel Export Promotion Council under market access scheme (Under chapter 3 of the foreign trade policy 2009-14 (Promotional measures in department of commerce).
  • Higher and assured three years direct financing to Apparel Export Promotion Council under market access scheme (Under chapter 3 of the foreign trade policy 2009-14 (Promotional Measures in dept. of commerce).
  • Gold Card Scheme : Dependency on using captive DG sets, by the garment exporters is increasing day by day due to the shortage of electrical power provided by the electricity boards, which increase the cost of production substantially. The diesel for using in the Gen sets should be provided to the garment exporters at international prices.

Issues which need recommendations to Ministry of Finance

Separate chapter for getting export credit (Rupee Pre-shipment/Post Shipment) at fixed 7.5%, as done in the past.

Service Tax :

  1. Waiving of Service Tax on taxable service to in sub clause (zzze) of clause (105) of Section 65 of Finance Act on services to specified associations under (zzze) of Finance Act) for the period viz. 16.06.2005 to 06.07.2009.
  2. Expansion of services under Section 66D (l) (ii) & (iii) of the Finance Act 1994 – negative list of service tax and service tax on vocational education/training courses.

It is requested that Govt. may notify ATDC and AEPC respectively as VEC and Skill Assessment Body, recognized by the law, since they are operating out of grants provided under Modular Employable Skill Course and funds are released by the MoT under budgetary heads mentioned above.

Income Tax :

Section 35 of IT Act, 1961 (Amendment Sought) :

The benefit of this section should be allowed by allowing readymade garment sample making to the extent of 5% of the turnover of that assessee in the same assessment year.

Other demands from the Ministry of Finance (MoF) include : DOR to issue clear-cut directions to field formations that no export consignment shall be stopped at ports, in line with FTP; All seaports, ICDs to be included for 24×7 clearance. MoF to issue directions; 15% Investment Allowance is now available for Projects of Rs. 100 cr and above. It is requested that for the apparel sector, the threshold limit may be reduced to Rs. 10 cr and Govt. to notify that Textiles Committee’s opinion on classification of garments shall be binding on customs.

Issues which need recommendations to Ministry of Labour & Employment

Overtime issue in Labour laws

  1. Extra wages for overtime under section 59 of Factories Act 1948 is more than what is prescribed under ILO convention – it should not be more than 125%.
  2. The cap of 50 hours a quarter should be removed under section 64 of the Factories Act, 1948.

Recommendations on FTP

It is recommended that the schemes may be extended by 3 years up to the year 2015-16, so that exporters can plan their marketing strategies on long term basis; in non-traditional apparel markets, the duty scrip may be increased from 3% -4% to 5%; in traditional countries like EU and US, duty scrip may be increased from 2% to 3%, under Status Holder Incentive Scheme, the duty scrip may be increased from 1% to 2% and expansion of Market Linked Focus Product Scheme to certain countries.

FTP para : 3.14.2 (Table 1 & 2 a) Focus Market Scheme – duty scrip may be increased from 3% to 5% for tapping non-traditional markets & to reduce the dependence on EU/USA.

FTP para: 3.14.2 Table 3 b) – Focus Market Scheme – duty scrip may be increased from 4% to 5%.

FTP 3.14.4 (DGFT ntf no.: 27(RE 2012) 2009-14 dt. 28/12/2012 – Incremental growth of exports : 2% incentives needs to be extended. Negative growth in Apr-March 2012-13 over Apr-March 2011-12 be qualified for incremental scrip. Thereafter the same benefit may be given for entire year till 2015-16 for the incremental growth achieved in previous year.

FTP para 3.15 Focus Product Scheme – Duty scrip of 2% incentive is only given to T Shirts – Request to add all products under chapter 61.

FTP para : 3.15.3 a) Market Linked Focus Product scheme (MLFPS) – Garment exporters wants duty scrip to be hiked to 3% for US and EU which is now 2%.

FTP para: 3.15.3 b) Market Linked Focus Product scheme (MLFPS)- Request to add the following countries and given them 3% duty scrip: Singapore, Turkey, Taiwan, Norway, Canada, Hong Kong, Russia, Switzerland, Korea, UAE and, Malaysia.

FTP para 3.16 Status Holder Incentive Scheme(SHIS) – garment exporters are seeking Increase from 1% to 2% SHIS Status holder incentive scheme should be continued with the transferability clause.

Shri Magu said, “Other demands with respect to FTP include : Early finalization of FTA with EU;To announce all the benefits in Foreign Trade Policy for three years; Duty Scrip @ 5% on FOB value of exports to countries like Latin America, Australia and New Zealand, where freight charges to FOB are very high, 3% interest subvention may be made available up to 31.03.2015, Zero duty EPCG Scheme to be extended in XII Five year plan and Zero duty EPCG Scheme should be made available to Apparel Exporters who have availed benefit of TUFS.”

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