Budget 2019: Not much for textile and apparel industry

by Dheeraj Tagra

06-July-2019  |  7 mins read

Image Courtesy: pib.nic.in

India’s Finance Minister Nirmala Sitharaman has presented Union Budget 2019. Though trade bodies have overall welcomed the budget, the textile industry, especially apparel manufacturers, are not happy with the budget as there is nothing special for them. Given below are the major points of the budget, which have an impact on Indian textile and fashion industry.

Textile: Overall budget allocation for textiles reduced by 30.41 per cent as it is Rs. 4,831.48 crore for 2019-2020 while for 2018-19 the same was 6,943.26 crore. This is mainly owing to the discontinuation of ROSL scheme from 7 March 2019. The new scheme called Rebate of State and Central Taxes and Levies (RoSCTL) which was announced simultaneously will be issued through free transferable scrips.

Rs. 700 crore (increased 12.4 per cent compared to the last budget) has been allocated for Amended Technology Upgradation Fund Scheme. However, the industry is not happy as the total pending TUF subsidy under various TUF schemes is amounting to around Rs. 10,000 crore.

There is a reduction in customs duty from 5 per cent to 2.5 per cent on imports of raw material under chapters 5101 & 5105 (wool fibre and wool tops). In terms of percentage change, the maximum change in grant is for Integrated Wool Development Program which has increased by about 447 per cent to Rs. 29 crore. In terms of value, the maximum grant is for Procurement of Cotton by Cotton Corporation of India (CCI) under Price Support Scheme which is 118 per cent higher than the last year to stand at Rs. 2,017.57 crore. It also has maximum share of 42 per cent in overall grant for textiles.

Multiple labour laws will be streamlined into a set of four labour codes. Also, Government will bring about labour reforms, to cut down on litigations.

The budget also says that the One Nation One Grid power sector tariff and structural reforms will support the textile industry.

Then the annual turnover limit has been raised from Rs. 250 crore to Rs. 400 crore for availing a lower corporate tax rate of 25 per cent.

To promote cashless transactions, the businesses with an annual turnover of over Rs. 50 crore can offer low-cost digital modes of payments and no charges or Merchant Discount Rate (MDR) will be imposed on them or their customers. Two per cent tax deducted at source (TDS) will be levied on cash withdrawals exceeding Rs. 1 crore in a year from a bank account to discourage the practice of making business payments in cash.

MSME: Under the interest subvention scheme, Rs. 350 crore allocation is for 2 per cent interest subvention to all GST registered MSMEs in the current year on all fresh and incremental loans. There is a plan to open a payment portal for MSMEs. Investment in MSMEs will receive a big boost through the portal if the delays in payments to SMEs and MSMEs are eliminated.

Startups: The startups and investors who file requisite declarations will not be subjected to any kind of scrutiny in respect of valuation of share premium. A mechanism of e-verification will be put in place and with this, the funds raised by startups will not require any tax scrutiny.

The special arrangements will be made by Central Board of Direct Taxes (CBDT) for pending reviews and cases related to startups.

Besides, there will be an exclusive TV channel for startups under Doordarshan bouquet to provide a platform for startups to disseminate information in the industry.

Retail: Local sourcing norms for single-brand retail to be eased. Small retailers with an annual turnover of less than Rs. 1.5 crore will get pension benefit under the Pradhaan Mantri Man Dhan Yojna.

Industry Reaction

“The Union Budget 2019-20 has laid ambitious targets to address various important issues relating to connectivity, power, skill development, etc. We hail 10-point vision for economic growth. I appreciate the substantial progress made on infrastructure front and initiatives taken on ease of doing business. Regarding TUF, I hope that once the Ministry of Textiles conducts joint inspection and makes the claims, adequate funds would be provided to enable the industry to mitigate the financial stress currently being faced,” P. Nataraj, Chairman, SIMA

“We welcome the procedural simplifications proposed – like interchangeability of PAN and Aadhaar, simplified single monthly return, fully automated GST refund module and the electronic invoice system. The industry hopes to witness a reduction in the compliance burden following these measures.  The industry today is faced with severe working capital shortage, due to long pending ROSL dues, difficulties in getting bank credits and GST refund blockages. The industry is also waiting for the ROSCTL scheme to be operationalised. We are hoping that the scheme gets enough funding for a smooth roll out and faster clearance of all past dues,” HKL Magu, Chairman, AEPC

This is a holistic budget aiming to not only boost the overall economy but also uplift the socio-economic conditions of the people of the country. Formation of National Research Foundation is a positive and welcome step and this would lead to more constructive and focussed R&D in textiles,” Sanjay Jain, Chairman, CITI

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