Competitive garment exports

| Updated on February 23, 2011 Published on February 21, 2011

Mr Rakesh Vaid

Mr. Dheeraj Vaidya

The basic objective of the Budget should be to make exports competitive as well as profitable, as the rising raw material prices have been adversely affecting the export potential of garment exporters.

The following are some of the recommendations: To hike duty drawback rates by 5 per cent by increasing the scope and coverage of duty drawback scheme so as to ensure full reimbursement of excise duties, custom duties, service tax, education cess and various State level taxes; to provide adequate and need-based funds to exporters at reasonable rates of interest which should not exceed 7 per cent as applicable to agriculture sector and restore 4 per cent interest rate subvention on export credit; to restore 100 per cent exemption to export earnings under Section 80 HHC of Income Tax Act at least for the next five years; in view of acute power shortage, Government should encourage captive power generation by providing diesel at international prices and exempted from excise duty and local levies; to exempt from Service Tax all the export-related services to avoid blockage of capital of exporters, as the procedure for refund is time-consuming, resulting in unnecessary delays and harassment; the association would like the Government to implement GST (Goods and Service Tax), at the earliest and also to clarify how the GST mechanism will work for the exporters which are now enjoying various tax reimbursement such as duty drawback, advance authorisation and advance licenses and so on; the Custom duty on import of textiles machinery, accessories and fabrics should be abolished allowing free import at nil rate; import duty on man-made fibres to be reduced to zero, so that the garment exporters can get cheaper man-made fabrics available in the country for manufacture and export garments at more competitive prices; the Government should arrange refund of State Levies on exports, amounting to six per cent of f.o.b. value.

Apart from taxation relief, Mr Vaid has stressed the need to reduce the transaction cost by simplifying administrative procedures by avoiding delays at Customs clearance of goods and improving loading and unloading of cargo and infrastructure at ports.

Rakesh Vaid

President, Garments Exporters Association.

New clauses in FBT

This year India Inc is looking forward to an outcome-based budget with focus on reducing the fiscal deficit.

Today companies in all sectors, manufacturing, technology, and so on, are working towards implementing innovative eco-systems within their organisations, government needs to encourage this through right-sized incentives. Investment in technology for the government sector needs to see increased attention.

While the process has been initiated, provisions are slow and the sector holds a huge potential.

There are currently a lot of issues around the Service Tax which need to be resolved on an immediate basis. Simplification of these and concessions to entrepreneurs and start-ups will help provide fuel for growth of Indian industry scenario.The small and mid-sized companies, especially in the IT sector, are looking forward to some new clauses in the FBT. In order to encourage and give a boost to this sector government should also focus on meeting their needs in this area.

On the long term outlook government should focus on improving the literacy rate in India. The sector needs large funds to be allocated towards its development as the current one per cent is extremely low.

Apart from education, infrastructure should be another main area for development. The Government needs to bring about ways to accelerate the growth of the sector through measures such as incentives on faster project completion.

Lastly, while there are multiple issues to be addressed, government needs to prioritise the needs of the different sectors and draft a structured plan to ensure simultaneous yet balanced growth

Ashank Desai

Co-Founder, Mastek.

Boost to eco-friendly packaging

The packaging industry is a Rs 65,000-crore industry and is growing at 15 per cent annually; the market growth is believed to have a direct correlation to GDP of the country.

Budget is expected to deliver a clear path for the roll out of GST in terms of necessary legislative amendments and removal of CST, encourage food processing and packaging, reduction in food waste with special incentives to companies engaged in such business which will play a key role to tackle food inflation in the country.

The recommendations made to the Government are as follows:

Deemed export should be brought at par with physical export for the purposes of refund of excise duty in order to address the issue of Cenvat accumulation with the industry.

Alternatively, the accumulated Cenvat credit should be allowed to be adjusted against the purchase of inputs so that excise duty should not be paid again on such inputs resulting into further accumulation of Cenvat.

Appropriate fiscal incentives should be considered to promote packaging which is environmental friendly, recyclable and sustainable. These incentives can be given in terms of subsidies, refund of indirect taxes, concessional duty on import of capital goods/inputs and income tax exemption.

Sanjay Bhatia

Managing Director, Hindustan Tin Works Ltd.

More allocation for school education

Though the Government has now realised the importance of education and had earlier increased the plan allocation for school education by 16 per cent in last year. We believe that the Government will show continued respect and focus to the “right to free education” Bill, which unfortunately had been limited to theory till date.

However, in this Budget, we expect even higher growth in plan allocation for school (at least by 20 per cent), with main focus on providing good quality education. The role of private-public partnership model should be evaluated in greater detail as this will lead to highly talented, high quality and employable workforce in India in the long run.

The government could provide the necessary funds for such projects, while, the private companies can take advantage of the efficient resource planning and execution capabilities. The salaries of teachers and faculties in government schools and colleges needs to be looked at.

Dheeraj Vaidya

Managing Director, Corporate Bridge Academy.

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Published on February 21, 2011
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