At a time when the Indian garment industry is seeing rough times due to costlier raw material and global economic challenges, garment manufacturers are hoping that Budget 2023-24 will include some steps to reduce their pain and increase the industry’s competitiveness in the global market. Finance minister Nirmala Sitharaman will present Budget on February 1.

Sanjay Jain, managing director of TT Limited told Fibre2Fashion, “Higher cotton prices are main cause of concern for the entire textile industry. The government should remove import duty for ease in cotton prices. Secondly, the finance minister may extend benefits to garment exporters under the Remission of Duties and Taxes on Exported Products scheme in case they import cotton under Advance Licence for export purpose. It will increase competitiveness in the global market. Higher cotton prices increased garment production cost, so the exporters are not in a position to offer competitive prices.”

He explained that cotton imports under Advance Licence offers duty-free raw materials for exporters, but they are not entitled for incentives under RoDTEP. He said that the government should announce a new technology upgradation scheme after expiration of ATUF (Amended Technology Upgradation Fund) scheme on March 31, 2022.

Shailesh Jain, director of e-commerce brand Mirraw commented, “The government should reduce the present GST rates for ready-to-wear items that cost more than Rs1,000 from the current 12.5 percent to 5 percent.”

Recent rise in raw materials caused for steep rise in cost of production and retail prices. High GST rates are discouraging consumers from buying. He said that taxation on Employees Stock Options should be based on actual gains, not hypothetical benefits. When options are exercised, the ESOPs are prematurely taxed under current laws.

Raja M Shanmugham, former President of Tiruppur Exporters Association and prominent garment exporter said, “The government should allocate special funding in line with ECLGS to handhold MSME units of garment industry. India’s garment exports industry, more particularly MSME units, have been affected badly due to bad international market situation caused by the Russian-Ukraine war.” He said that the finance minister should instruct the Reserve Bank of India (RBI) to announce a moratorium of minimum six months for the existing loan payments. The government needs to set up Research & Development facilities at garment clusters including Tiruppur as MSMEs require research support to compete in the international markets. Special funding is also required to develop labour supportive infrastructure in clusters where labour intensive industries like garment are concentrated.

Kishore Kumar Ladia, director of Space Fashions Limited said, “The government should decide if it wants to develop domestic industry, or it will allow competitors to enjoy current market dynamics.” Currently costlier cotton is key pain point for Indian garment industry. On the one hand, the cost of production of garments have increased since last year, on the other, cheaper garments are being imported in India from China, Bangladesh and other countries. As a result, garment industries from competitor countries are enjoying present market dynamics. He urged the government to stop import of cheaper garments from other countries.

Anurag Mohota, director of Gimatex Industries Pvt Ltd said, “The finance minister should announce second version of Production Linked Incentive (PLI-2) scheme for rest of the segments of the textile value chain. A skill development scheme for the textiles sector is also need of the hour because India lags behind in skills and a lot of training is required. The government should incentivise training and skill development scheme in the industry.

Giving his opinion on Budget expectations, Akhil Jain, executive director of women’s fashion brand Madame, said, “PLI scheme should be announced soon for the garment industry. MSMEs should get judicious focus in the scheme.” He further said that the government should take initiative to bring all apparel under the bracket of 5 percent of GST. Fashion apparel comes under the ‘discretionary spending’ category. 12 percent GST on fashion apparel is causing high costs for end-consumers. Due to inflationary pressures, the discretionary spending of consumers is going down. Additionally, most of the inputs, services and capital goods required by the retail industry attract a higher rate of GST mostly 18 percent, while the output rate of GST is lower. This results in an unutilised input tax credit of GST causing blockage of working capital and increased cost of operations. He added that the government should amend the formula for calculating refunds under the inverted duty structure category in order to allow unrestricted refunds of unutilised GST on services as well as on capital goods.

He said that the retail industry is awaiting the re-introduction of Technology Upgradation Fund Scheme (TUFS) to reduce its cost of technology upgradation, in which MSMEs are also able to participate. The National Retail Trade Policy should be expedited to provide the much-needed ‘Ease of Doing Business’ to the fashion retail industry.