The Centre plans to implement the entire incentive package for the textiles and garments sector announced recently - which includes fiscal sops as well as labour law flexibilities - over the next three months.
The fiscal incentives in the package, which is expected to cost the ex-chequer an estimated Rs 6,000 crore, include enhanced duty drawback coverage with refund of State levies not being compensated so far, additional funding under the Technology Upgradation Fund Scheme (TUFS) and enhanced scope of income tax exemption under Section 80JJAA of the Income Tax Act.
The Textile Ministry has asked the industry to provide data on the State taxes being paid by exporters which need to be reimbursed. “We have shortlisted 550 exporters spread across the country to give a detailed list of all such taxes which include octroi, municipality tax and various levies so that the government gets the appropriate inputs for calculation of fresh drawback rates,” AEPC Chairman Ashok Rajani says.
Several relaxations in the labour law, including introduction of fixed term employment in the sector, making EPF optional for employees earning less than Rs 15,000 per month and the government bearing the entire employer’s contribution of 12 per cent under the EPF scheme for new employees of garment industry earning less than Rs 15,000 per month, for the first three years, are also part of the package.
The new incentives will help Indian exporters beat competition from countries like Bangladesh and Vietnam and fill the space being vacated by China in the global market for clothing, according to the Apparel Export Promotion Council (AEPC). Garments exports from India will increase by a whopping $30 billion over the next three years once the incentive package for the textile sector announced recently is fully implemented, the industry body said.
In 2015, India’s garments exports were worth $17.1 billion, which was 3.6 per cent higher than exports worth $16.5 billion in the previous year. China, on the other hand, exported garments worth $162.5 billion in 2016, which was lower by 3.5 per cent compared to what it exported the previous year.