Budget growth oriented BCD on cotton a conern : TEXPROCIL

10 BUDGET REACTIONS lakhs of people, prevent fall in the the global customers and also the exports and also curb cheaper value added made-ups and apparimports of value added products el segments of domestic market. from the SAFTA countries like He has cautioned that the country Bangladesh, Sri Lanka, etc. is already flooded with cheaper Shri T. Rajkumar further stated that the levy of 10% duty will not benefit the cotton farmers as the imports of readymade garments from SAFTA countries and facing crisis. normal import of 12 to 14 lakh Chairman CITI also welcomed the bales per year accounts for only move of allowing women to work around 3% of Indian cotton pro- in all categories and also in the duction and consumption and night-shifts with adequate prosuch cotton is not produced in In- tection, modified the definition dia. But this is essential to sustain of small companies: companies the share of value added / niche with a paid-up capital not exceedmarkets of India both in global ing 2cr & a turnover not exceeding and domestic markets. He has 20cr are to be considered small added that after the introduction companies, implementation of of BT cotton that accounts over the 4 labour codes, minimum wag97% of the cotton produced in the es to all categories of workers, and country, the cotton textile industry all will be covered by the Employhas to import ELS cotton, organic ees State Insurance Corporation cotton, contamination free cotton (ESIC) are welcome decisions for to the tune of 10 to 12 lakhs bales the upliftment of Indian economy. per year to meet the demands of Shri T. Rajkumar pointed out that in some of our major appeals we had requested to the Hon’ble Prime Minister to remove anti-dumping duty on VSF and bring uniformity in GST slab for MMF value chain to enable the MMF Sector to have a level playing field which has still remained unresolved and would keep on pitching for the same with the Government departments. Chairman CITI concluded by saying that the outlined six pillars of proposals to strengthen the vision of Atmanirbharta, such as health and well-being, capital and infrastructure, inclusive development, reinvigorating human capital, innovation and R&D and minimum government and maximum governance will lay a strong foundation for the future growth of not only the Indian Textile & Clothing Industry but for the entire economy as well.

BUDGET GROWTH ORIENTED BCD ON COTTON A CONCERN : TEXPROCIL

Welcoming the Union Budget for 2021-22 as growth-oriented, The Cotton Textiles Export Promotion Council (TEXPROCIL) has added that the imposition of basic customs duty (BCD) on cotton is a matter of deep concern. It has urged the government to withdraw the duty immediately to avoid adverse impact on employment and investments in the textile sector. The Union Budget has announced Mega Investment Textiles Parks (MITRA), under which seven textile parks will be established over a period of three years. “This is a very positive step which will enable the textile industry to become globally competitive, attract large investments and boost employment generation,” said TEXPROCIL chairman Manoj Patodia in a press release. The Budget has reduced the BCD on caprolactam, nylon chips and nylon fibre & yarn to 5 per cent. This will encourage the growth of the MMF sector especially the MSMEs, according to the chairman, TEXPROCIL. On the direct taxes front, the Budget has reduced the time-limit for re-opening of assessment to 3 years from the present 6 years. "This is a welcome step and it will remove the uncertainty for the assesses," the release said. However, the imposition of 10 per cent BCD on raw cotton was surprising, said Patodia. He added that this will make imports of Extra Long Staple (ELS) cotton costly, especially Giza cotton from Egypt and Supima cotton from the US. Patodia expressed his apprehension that the imposition of import duty on cotton will increase the domestic prices of cotton, which will now be based on the import parity price plus the BCD, which in turn will increase cost for valueadded products like fabrics, made ups and garments. He also pointed out that there has been a decline in imports of cotton by a sharp 77 per cent during January-November 2020 as compared to the same period in 2019, and as such there is no case for an imposition of import duty on cotton. He appealed to the government to withdraw the BCD on cotton in the interest of the textile & clothing sector and its orderly development, especially as India is a cotton surplus country. He further stated that if the BCD on cotton is not withdrawn immediately, it will have an adverse impact on employment and investments in the value-added textile and clothing sector.

Key HIGHLIGHTS OF UNION BUDGET 2021-2022

Union Finance Minister Nirmala Sitharaman tabled the Union Budget 2020-21 in the Lok Sabha Union Finance Minister Nirmala Sitharaman tabled the Union Budget 2020-21 in the Lok Sabhatoday. The minister insisted that the Budget will boost income and purchasing power. Given below are some of the important points of the Budget regarding textile and apparel industry. 1) Technical Textiles: India imports a significant quantity of Technical Textiles worth US $ 16 billion every year. To reverse this trend and to position India as a global leader in Technical Textiles, A National Technical Textiles Mission will be introduced, with a four-year implementation period, at an estimated outlay of Rs. 1,480 crore. Anti-dumping duty on purified terephthalic acid (PTA) is being abolished. Notably, PTA, for example, is a critical input for textile fibres and yarns. 2) Budget for Textile Ministry: The Ministry of Textiles has been allocated Rs. 3,514.79 crore in the current Budget against the allocation of Rs. 4,831.48 crore in the 2019-20 Budget. 3) ATUFS: For ATUF Scheme, the fund allocation is only Rs. 761.90 crore. 4) Imposition of 10% Customs Duty on Cotton Imports to Support Farmers: India, the world’s biggest cotton grower, imposed a 10% import tax on the fiber to help farmers, Finance Minister Nirmala Sitharaman said in her budget speech in parliament on Monday. A levy on overseas purchases will potentially support local prices amid higher domestic production and prevent distress sales by the growers. There was no duty on cotton imports until now. The government also raise the levy on raw silk and silk yarn to 15% from 10%, according to the minister. India’s cotton output may climb to 37.12 million bales of 170 kilograms each in 2020-21, from 35.49 million bales a year earlier, according to the farm ministry. Imports are expected to fall to 1.4 million bales this year from 1.55 million bales in 2019-20, according to the Cotton Association of India. The state-run Cotton Corp. of India will increase purchases from farmers to 12.5 million bales in 202021 from 10.5 million bales a year earlier, according to the textile ministry. The government plans to spend 350 billion rupees ($4.8 billion) to buy cotton, compared with 285 billion rupees a year ago. 5) Proposal for Mega Investment Textile Parks (MITRA): To enable Textile industry to become globally competitive, attract large investments and boost employment generation, a scheme Mega Investment Textile Parks (MITRA) will be launched in addition to PLI Scheme. This will create world-class infra-structure with plug in play facilities to enable create global champions in exports. 7 such textile parks will be established over 3 years. 6) Customs Duty Rationalization: The Textiles Sector generates employment and contributes significantly to the economy. There is a need to rationalize duties on raw material inputs to manmade textiles. We are now bringing nylon chain on par with polyester and other man-made fibers. We are uniformly reducing the BCD rates on caprolactam, nylon chips and nylon fiber& yarn to 5%. This will help the textile industry, MSMEs, and exports, too. Our Customs Duty Policy should have the twin objective of promoting domestic manufacturing and helping India get onto global value chain and export better. The thrust now has to be on easy access to raw materials and exports of value added products. Towards this, last year, govt started overhauling the Customs Duty structure, eliminating 80 outdated exemptions. I also thank everyone who responded overwhelmingly to a crowd-sourcing call for suggestions on this revamp. I now propose to review more than 400 old exemptions this year. We will conduct this through extensive consultations, and from 1st October 2021, we will put in place a revised customs duty structure, free of distortions. I also propose that any new customs duty exemption henceforth will have validity up to the 31st March following two years from the date of its issue. 7) Incentive for Employers for Restoration of Jobs: Earlier govt has announced an incentive scheme for people to join back and to take their jobs back. For employers to take back employees who were thrown out and have some money paid by the govt for their EPF? Govt has worked out a scheme and that scheme will run till next year. Govt has allowed employers to get those people who were thrown out of their jobs to be back in the job for whom govt will pay EPF for two years. This is an incentive for people to take them back. 8) MSME Products including Textiles. 1. a) Import of duty free item:

- Mill Owners Association, Mumbai

12 BUDGET REACTIONS Govt is rationalizing exemption on certain sensitive items, so as to import of duty-free items as an in- ensure that FTAs are aligned with centive to exporters of garments, the conscious direction of Governleather, and handicraft items. Al- ment policy. It has been observed most all these items are made that imports under Free Trade domestically by our MSMEs. We Agreements (FTAs) are on the rise. are withdrawing exemption on im- Undue claims of FTA benefits have ports of certain kind of leathers as posed threat to domestic industry they are domestically produced in and such imports require stringent good quantity and quality, mostly checks. This will help reduce imby MSMEs. We are also raising cus- ports from Bangladesh, etc. that is toms duty on finished synthetic plaguing textile industry. The Govgem stones to encourage their do- ernment proposes amendments mestic processing. in Companies Act to decriminalise 1. b) MSME- Finance related: civil offences. The Budget proposed to raise by 5 times the turnover threshold for audit from the existing Rs. 1 crore to Rs. 5 crore. Further, in order to boost less cash economy, it is proposed that the increased limit shall apply only to those businesses which carry out less than 5 per cent of their business transactions in cash. As of now, businesses having turnover of more than Rs. 1 crore are required to get their books of accounts audited by an accountant. A scheme to provide Tax payer charter will be part of statute. Around 70 of more than 100 income tax deductions and exemptions have been removed, in order to simplify tax system and lower tax rates. The Budget has also proposed ‘Vivad se Vishwas’ scheme for direct tax payers whose appeals are pending at various forums. The tax on cooperative societies has been proposed to be reduced to 22 per cent plus surcharge and cess, as against 30 per cent at present. subordinate debt for entrepre- Besides, Rs. 3,000 crore proposed neurs of MSMEs will also be intro- to provide for skill development. duced. The Government has also asked RBI to extend debt restruc10) For exporters: turing window for MSME by a year Digital refund of duties and taxes to 31 March 2021. An app-based of centre, states and local bodies invoice financing loans product to exporters from this year. Nirvik will be launched. This will obviate (Niryat Rin Vikas Yojana) scheme the problem of delayed payments to provide enhanced insurance and consequential cash flows mis- cover and reduce premium for matches for the MSMEs. small exporters. 9) Applicable for all Industries: 11) Start-ups: In the coming months, the Gov- The Government proposes to proernment shall review Rules of Ori- vide early life funding, including a gin requirements, particularly for seed fund to support ideation and development of early stage startups. The Budget proposes deferment of tax payment by employees on ESOPs (employee stock ownership plan) from start-ups by 5 years or till they leave the company or when they sell their shares, whichever is earliest. An eligible start-up, having turnover up to Rs. 25 crore, is allowed deduction of 100 per cent of its profits for 3 consecutive assessment years out of 7 years if the total turnover does not exceed Rs. 25 crore.In order to extend this benefit to larger start-ups, there’s a proposal to increase the turnover limit from existing Rs. 25 crore to Rs. 100 crore. Moreover, considering the fact that in the initial years, a start-up may not have adequate profit to avail this deduction, the Government proposes to extend the period of eligibility for claim of deduction from the existing 7 years to 10 years. 12) For Public Ltd. Companies: Dividend distribution tax (DDT) to be removed (currently it is 15 per cent). Dividend shall be taxed at the hands of the recipients. 13) Logistics: Rs. 1.7 lakh crore provided for transport infrastructure in 202021. 14) Sustainability: India’s commitment towards tackling climate change made in Paris conference kick starts from 1 January 2021.

Mr. Anuj Mundra, Chairman & MD, Nandani Creation: “With focus on Aatmanirbhar Bharat, announcement of establishment of 7 textile parks by Modi government in Budget 2021 should be welcomed with open arms. It’s a big boost for the local textile industry. And, this will help India become a world leader in textile sector. Hon’ble Union Finance Minister Nirmala Sitharaman in her Union Budget 2021 has clearly conveyed a message that this government believes in giving a big shot in the arm of textiles and local manufacturing with special focus on Vocal for Local.”

In lieu of the Union Budget 2021-22 announcement, here's a quote from Mr. Rajendra Agarwal, Managing Director, Donear Industries Ltd., expressing his views"Due to the Covid-19 pandemic, like many other industries, the textile industry too underwent numerous challenges, impacting demand and supply, due to the change in consumer buying behaviour and the consumption pattern. With the vision of establishing a USD 5 trillion economy, the manufacturing sector will have to grow in double digits and become a

UNION BUDGET 2021-22

- Mr. Rajendra Agarwal Managing Director Donear industries Ltd

part of the global supply chain, as highlighted by the Hon'ble Finance Minister. Taking the above into consideration, the Production Linked Incentive (PLI) Scheme had been launched. In addition to this, the budget has certainly opened up avenues to encourage global competition, attract large investments and boost employment generation via the launch of Mega Investment Textiles Park (MITRA), wherein, seven Textile parks will be established over the course of 3 years. Emphasising the Indian government’s initiative of Atmanirbhar Bharat, and with imports being drastically cut down, there is less opportunity for new entrants, which will in turn strengthen the position of local players (like us) who can fill these niches. Additionally, the Union Budget 2021 also announced the bringing of nylon chain on par with polyester and other man-made fibers, reducing BCD rates on caprolactam, nylon chips and nylon fiber & yarn to 5%, aiding the textile industry. Therefore, 2021-22 seems to be the year of revival for the textile industry as there are good tidings expected for the textile industry from manufacturing, consumption, employment generation and from a boosting demand standpoint."

REACTIONS TO BUDGET 2021 – CMAI

The Clothing Manufacturers Association of India (CMAI) the Apex Association of the Apparel Industry of the Country has welcomed the Union Budget presented today in the Parliament by the Hon’ble Finance Minister Smt Nirmala Sitharaman. Mr Rajesh Masand, President, CMAI said that the announcement on the 7 Mega Textiles Parks was the highlight of the Budget directly impacting the Textile Industry. This is in line with the Government’s intention to encourage Mega Projects and increasing the scale of operations in the Textile Industry. This has to be applauded. A particular positive aspect of this scheme is the incorporation of Plug & Play Model which will enable the Members of such Parks to avoid huge Capital expenditure outlays. Mr Masand further stated that Lack of scale has been the bane of our efforts to increase our share in the Global Trade especially in the Apparel Sector. However, the Government also has to very closely study why the Textile Parks have not really succeeded in the past. It is very crucial to avoid errors of omission and commissions in the past. Otherwise, this will remain one more well intended scheme which fails to lift the fortunes of the Textile Industry. Mr Masand also pointed out that the increase of Import Duty on Cotton and Cotton Fiber may not impact the Industry too adversely since the current imports are at a miniscule level. However, this does come at a time when the industry is reeling from an unprecedented increase of raw material prices especially Yarn and could send a wrong signal. In an indirect manner though, the Budget has made several announcements which will have a positive impact on Consumer spending – such as increases in infrastructure and overall Government Expenditure – and this will help the Industry, especially the Apparel sector. The permission to form a Oneperson Company may also indirectly benefit the smaller Apparel manufacturers, many of whom are in the Micro sector and one-man shows. They are likely to get much more support from the Banking support than before. The increase of the Tax Audit slabs should also benefit the smaller members of the Apparel Sector.