Budget Wishlist: CMAI seeks immediate implementation of GST

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Interim Budget Special | 12 Feb, 2009
The Clothing Manufacturers Association of India (CMAI) is the pioneer and most representative association of the Indian apparel industry for over four decades. It has a membership base of over 20,000 companies, including readymade garment manufacturers, exporters, retailers and ancillary industry. With its headquarter in Mumbai, CMAI also has branches in New Delhi, Bangalore and Pune. CMAI and its members have prepared a pre-budget memorandum (2009-2010) for the garment industry.

ISSUES RELATED TO THE DOMESTIC SECTOR

1. Import Duty on Capital Goods:
Currently, import duty on garment machinery is 5% + CVD + Education Cess (Normal + Special). The technology is changing fast as even three-year old machines are considered obsolete. Modern technology not only improves the quality of the garments but also helps to reduce cost and for India to be cost-competitive.

Submission: Industrial garment machinery including machinery required for inserting accessories like zippers, welcro etc. should be exempted from CVD as well as Education Cess. In fact, it would give a boost to modernization if industrial garment machinery is totally exempted from any customs duty.

2. CST & 'C' Form:
The industry was promised that CST would be NIL by 2008. So far, it has only been reduced from 4% to 3%. For an up-country sales, a manufacturer / dealer has to produce a 'C' Form which is available with the corporation offices. It is unfortunate that these forms are available only at a price.

Submission: Manufacturers/Dealers should be permitted to type the exact wordings of the 'C' Form on their respective letterheads to be signed by the Buyer/Seller. Such forms be accepted by the corporation as evidence of up-country sale.

3. GST:
Every Finance Bill carries a dose of tax on industry – either on business or on service. Some of these even overlap like cargo handling service and part service. With a view to amalgamate all these into a single tax, the industry was promised a 'Goods & Service Tax' (GST).

Submission: Immediate implementation of GST.

4. Research & Development Expenses: IT Tax Deduction:
As a fashion-oriented garment industry, it has to spend considerable sum of money on product development, design development, fabric innovation and sampling.

Submission: With a view to encourage the industry on these lines, the industry may be allowed 150% of its expenses on research and development, subject-to a maximum of 5% of the annual turnover of the unit as certified by a Chartered Accountant.

5. Ban on Imports of Secondhand Clothing:
Taking advantage of low rates of import duty levied on 'weight basis' (instead of on a 'per piece basis' as is the case for normal imports), second hand clothings are sold on footpaths of metros posing a serious challenge to domestic production. This not only results in serious loss of revenue for government but also encourages dumping of garments into the country by own institutions.

Submission: A complete ban on imports of 'secondhand' (Worn) clothing. This will not only protect government revenue, but also protect employment in the entire textile chain. India produces sufficient garments not only for domestic needs, but also to clothe the world.

ISSUES RELATED TO THE EXPORT SECTOR

1. Continuation of the 4% Interest Subvention Scheme under TUF:
The Budget presented by the Hon'ble Finance Minister on Feb. 29, 2008, discontinued the interest subvention granted under the TUF Scheme. This withdrawal has raised the cost of borrowing and has proved detrimental to modernization in the garment industry.

Submission: Restoration of the 4% Interest Subvention Scheme and availability of adequate funds to banks to enable them to implement the scheme.

2. Removal of Drawback Caps for Value-Added Exports:
Caps in the duty drawback schedule, compel exporters to export only low-value items. While the entire global trade is moving towards value-added products, this policy adopted by Govt. of India violates against export of value-added products.

Submission: To remove drawback caps in the drawback schedule in the interest of increasing exports for India.

3. Special Duty Free Licences for Import of New Fabrics/ Trimmings:
Certain Fabrics/ Trimmings are not manufactured in India or if so, not in sufficient quantity. Examples are linen, ramie, wool, silk, artificial jewels, lycra etc. Such Fabrics/ Trimmings raise the value of the garment. However, they also raise the cost of manufacture, when imported and there is a considerable time-lag between receipt of an export order and the inclusion of the raw material or trimming in the SION List.

Submission: With a view to cut short this time-lag and to cut production costs, the import of such fabrics should be permitted duty-free at the rate of 1.80 mtrs/ per trouser (100 width) or 3.50 sq.mtrs. for a full-length garment ( up to the knee ), under SION scheme. Similarly, trimmings like artificial jewels, etc. should be allowed duty-free on a one-to-one basis under the SION Scheme.

4. Focus Product Scheme - Inclusion of Silk / Woollen Garments:

This new scheme introduced in EXIM 2006, should be made available for export of garments from Yarn/Fabric of Silk/Wool/Jute etc. Currently, production hardly exceeds 4% to 5% in volume for these garments.

Submission: Scheme should be made available against exports of Silk/ Woollen garments also. This will add variety to garment export basket which is today heavily weighted in Cotton/Synthetic etc.

5. Focus Market Scheme - Inclusion of Other Markets:

This was introduced in Exim 2006. The scheme should be extended to cover all markets where export performance is 5% or less of the total volume of exports.

Submission: Scheme should be made available for export of garments to all countries of the world where export performance is 5% or less of total volume of exports. This will help to broaden market-base, rather than restrict a majority of garment exports only to EU/ USA/ Canada.