The Apparel Export Promotion Council (AEPC) has called on the Indian government to introduce tax incentives and policy changes in the upcoming Union Budget to strengthen the country’s apparel export sector. The AEPC’s recommendations aim to address critical challenges, enhance competitiveness, and spur growth in the industry.
Among its key proposals, AEPC has requested the removal of Section 43B (H) of the Income Tax Act, which mandates payments to Micro, Small, and Medium Enterprises (MSMEs) within 45 days to claim tax deductions. The council highlighted that this provision has disrupted exporters’ cash flow and increased their tax liabilities.
Additionally, AEPC has sought customs duty exemptions on garment machinery imports, citing the heavy reliance on imported machinery to meet global quality standards. It argued that high import duties make Indian garments less competitive compared to those from countries like Bangladesh and Vietnam. AEPC urged the government to reduce customs duty on all garmenting machinery to zero, emphasizing the need to enhance the sector’s efficiency.
Other significant demands include:
- Interest Equalization Rate: Introduction of a 5% interest equalization rate to support exporters.
- Concessional Tax Rate: Extension of the concessional tax rate for new manufacturing units to encourage investment in garment production facilities.
- Simplified Import Procedures: Streamlining the process for importing trims and embellishments under the Import of Goods at Concessional Rate (IGCR) scheme.
- E-commerce Export Reforms: Increasing the cap on per-consignment export value under e-commerce to ₹25 lakh and extending the export realization period to 12 months.
AEPC also stressed the importance of labour reforms, workforce upskilling, and increased investments to capitalize on shifting global supply chains. Secretary General Mithileshwar Thakur noted that the sector is poised for high growth and could outpace global competitors with the right strategies in place.
Chairman Sudhir Sekhri added, “The Union Budget presents a crucial opportunity for long-term policy support to sustain the momentum of the Indian apparel industry.”
The Budget, to be presented on February 1 by Finance Minister Nirmala Sitharaman, is expected to play a pivotal role in addressing these challenges and unlocking the sector’s potential to expand globally.
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