Apparel exporters demand tax sops

The Confederation of Indian Apparel Exporters (CIAE) in its pre-budget memorandum has asked for tax holidays and scrapping of fringe benefit tax (FBT) among various other proposals.

Reasoning that apparel exporters "provide employment to millions," CIAE has asked the government for 100 per cent exemption on export profits under section 80 HHC of the Income Tax Act, 1962.

If not, says CIAE, "a specific section should be introduced in the Income Tax Act, 1961 granting a 50 per cent tax deduction for profits from export of apparels with an additional 50 per cent tax deduction, if such amount is transferred to a special reserve account, which can be utilised for acquisition of capital assets, research and market development. This tax exemption is sought upto financial year 2014-2015."

The confederation has also asked for exemption from registering with central excise for using transport services.

On the FBT issue, the CIAE has noted that the expenditure incurred on liaison, participating in fairs and overseas travel to source fabric is for general business promotion and thus can't be considered as fringe benefit.

"The budget should push for flexible labour policy which will encourage domestic and foreign investment in the apparel and textile sector. The obsolete and rigid labour laws have resulted in the manufacturing sector growing at 7 per cent and the employment in this sector growing only at a mere 2 per cent."

At present, to import textile machines, the apparel manufacturers pay customs duty at concessional rates of 5 and 10 per cent. But a 16 per cent of countervieling customs duty (CVD) is payable on the imported machines, which the exporters say, effectively increases the net duty to be paid. "It is requested that the CVD maybe removed from the machines," says CIAE.

In the pre-budget memorandum, the CIAE has also asked the Finance Ministry to provide for 10 per cent capital subsidy for apparel making machines under the TUF Scheme. This is at par with the additional incentives of 10 per cent capital subsidy for the processing machinery under TUFS.

The confederation has also requested that 100 per cent investment on capital should be considered under the TUF scheme and not 50 per cent of the total investment.