FICCI textiles industry delegation submits agenda to Minister of Textiles Ms Smriti Zubin Irani

Jun 14, 2019

•  Mission for Man-Made Textiles, Simplification of GST Rates, Rising Imports and Cost of Borrowing and Need for Warehousing for Raw Materials Tops the Agenda

NEW DELHI, 14 June 2019: Delegation of FICCI Textiles Committee met Ms Smriti Zubin Irani, Minister for Textiles and Women and Child Development yesterday and impressed upon her to launch a special mission for synthetic fibre and textiles value chain to make Indian industry competitive in the global trade which is predominantly done in the man-made fibre (MMF)-based items.

Global textile markets are swiftly shifting from exports of cotton yarn to manmade fibres. Hence, India must take urgent steps to keep pace with the global markets by increasing production and exports of MMF based products. India's per capita consumption of Man-made Fibre is around 3.0 kg, whereas the world per capita consumption is 12 Kg. There is a wide gap and tremendous opportunity for enhancing the consumption of MMF based textiles and clothing in India. Government needs to announce a MMF Textile Mission for giving thrust to development of Synthetic and Specialty fibres in India by making the value chain competitive and providing raw materials at competitive prices, said FICCI.  This mission mode approach with specific time bound targets will help India to garner higher export share in global markets and new employment opportunities across India.

Other important issues raised by the FICCI delegation were need for simplification of GST rates for the entire textile value chain (one rate for the entire textile value chain), rising imports of garments from Bangladesh and need for separate housing scheme for garment workers in the cities.

Currently, due to different GST rates in the textiles value chain refund accumulates due to inversion. Collapsing all these rates into a single rate of 12% does not build up input tax credit, does not lead to refund of input tax credit which would imply less paperwork and less applications for the industry, noted FICCI.

Further, garment imports from Bangladesh have increased almost by 82% in 2018-19 vis-a-vis 2017-18 (from US $ 200 million to US $365 million) pointed out FICCI. Imported garments have got 12-15% advantage vis-a-vis domestic garments in the post GST period. FICCI suggested that under the SAFTA agreement only those goods should be exempted from custom duty, whose raw material is also manufactured by SAFTA countries. Yarn and fabric forward rules of origin are required under SAFTA to ensure any duty free garment import is made up of yarn or fabric from within the SAFTA countries only.

To increase the employment of women workers in garment sector, FICCI suggested to increase the deduction under IT Act Section 80JJAA for women work force from present 30% to 60% per annum threshold. IT Act Section 80JJAA provides deduction in respect of employment of new employees drawing emoluments up to Rs 25,000 per month (explanation- At present, under section 80-JJAA of the Act, a deduction of 30% is allowed in addition to normal deduction of 100% in respect of emoluments paid to eligible new employees who have been employed for a minimum period of 240 days during the year. The minimum period of employment is relaxed to 150 days in the case of apparel industry). This would encourage employers to employ women work force which is now constrained by social and statutory conditions

FICCI also requested the Minister to come out with a Worker Housing scheme for apparel sector in the cities. The need for such a scheme arise from the growing difficulties faced by women garment workers due to lack of safe and conveniently located accommodation in cities. Also, to arrest and increase the declining female workforce ratio in the country, it is important to have such a scheme for the women workers in and around cities, noted FICCI.

On cost of borrowing, FICCI said that Indian manufacturers are currently reluctant to invest in capital intensive businesses like technical textiles owing to substantial cost of borrowing in India (which is the highest in the world). The prevailing ATUFS (Amended Technology Upgradation Fund Scheme) allows only capital subsidy for technical textile business. FICCI suggested that the interest subsidy is also included along with the Capital subsidy under ATUFS.

Other major issues raised by FICCI delegation were:

• WTO Compliant scheme for exporters: Need to replace the existing export promotion schemes with WTO compliant schemes.
• R&D deduction: Restore the rate of deduction to 200% from 150% in IT Act 35 2(ab). Lot of activity in textiles value chain in garment, technical textiles etc is in-fact an outcome of scientific research.  It involves creation of a fabric, design, pattern, identification of colours which are different for a country, for a buyer, for a season.  Normally, scientific research in readymade garment sample is done for 8 to 10 fashion seasons. These all activities are performed in-house by the assessee through scientific research by employing merchandisers and other raw material for fabrics and embellishments etc.  The Government can also consider introducing benefits in the form of research tax credits which can be used to offset future tax liability (similar to those given in developed economies). This proposal could be a starting point for shifting export-based subsidy to manufacturing based incentive to make it WTO compliant.
• ATUFS- As per present ATUFS policy, no subsidy is available for entities which have already claimed Rs 30 crores under previous TUFS schemes over the years. Limit of Rs 30 crores under ATUFs should be removed to allow companies to work seamlessly. At present it is a big limitation for companies wanting to expand its growth through additional capex thereby limiting growth and investment.
• Hank Yarn Obligation: In January 2019, the Government has amended hank yarn packing obligation from 40% of total yarn packed to 30%. Suggest that the obligation needs to be removed fast in a phased manner.
• Warehousing facility: Warehousing facility needs to be provided at ports especially for raw materials for textiles sector. This will ensure timely supply as in certain cases like Egyptian cotton, one has to wait for weeks to get the raw material which delays the shipments.

Technical Textiles

•   Following were suggested by FICCI delegation for the growth of technical textiles sector in India:

1.      Further identification of HSN Codes for technical textiles items (in addition to the 207 HSN Codes identified).

2.      Provide a Phased manufacturing programme (PMP) for the sector which will give clarity to the investors for manufacturing in the country

3.      Promote Manufacturing hubs for conversion of technical textiles to finish products with common R&D facility and other common facilities.

4.      Provide preference for domestically manufactured goods with minimum local content requirements in Government procurement as per the DPIIT Make in India Procurement Order. This should be extended to States too.

5.      Deepening inter-disciplinary engagements with other Departments where the technical textiles find usage and promote its usage in Government schemes

6.      Continue and hasten the process of standardisation with the support of BIS in all the areas, by prioritising standards from the point of view of health, hygiene, environment, safety and security.

7.      Mandating the usage of these products on health, hygiene, safety, environment, security aspects in various areas

8.      Encouraging investments including FDI in the sector through specific incentives for large scale investments and other promotional measures

9.      Provide requisite infrastructure and eco-system for the testing and research and development

10.  Provide higher incentives for R&D for this sector to the industry as it is technology intensive

Annexure: GST in Textiles Value Chain