Tirupur Exporters’ Association (TEA), the apex body of knitwear/garment units, has moved the Union finance ministry with host of demands, including import of specialty fabric using Export Performance Certificate and extension of rupee export credit at 3% interest rate subvention.
TEA also wants an increase in the Technology Upgradation Fund Scheme (TUFS) subsidy for garmenting machinery.
In order to enhance knitwear exports and stay competitive in the global market where the association is facing a stiff competition from countries such as China, Bangladesh, Vietnam, Cambodia and Indonesia, the Union finance ministry should consider providing investment allowance, withdrawal of alternate minimum tax (AMT), refixing of TDS and enhanced wealth tax limit, said TEA in its pre-Budget memorandum to Union finance minister Arun Jaitley.
TEA president A Sakthivel said the present provisions of Sec 32Ac envisages a deduction of 15% of the value of new machinery acquired and installed in the year. This deduction is available only to corporate assesses and there is a ceiling of the minimum investment at R25 crore in purchase and installation of new machinery. The readymade garment manufacturers, especially the hosiery industry comprises mostly of units under the SME non-corporate sector. Hence in order to increase the exports this deduction should be extended to the non-corporate sector also and the minimum ceiling of investment may be scaled down to R1 crore.
The levy of AMT virtually reduced the total exemption provided under the Finance Act 2011 to only 35% because of the levy of tax @ 18.5% on the income before deduction. This amount of AMT is allowed to be carried forward for a period of 10 years.
This levy of AMT causes acute crunch in the liquidity of the units as they have to service their debts also during the period. This provision may be withdrawn so as to enable the units to avail full exemptions in the hour of need, the TEA president said in his memorandum.
According to Sakthivel, the threshold limits fixed for deduction of tax at source (TDS) are outdated and substantially low when compared to the inflationary trend. These limits have to be suitable refixed considering the inflationary trend over the years and the increase in the threshold limits under other provisions like basic limit, turnover limit of audit u/s 44 AB.
As the duty-free import percentage has been increased to 5% from July 10, 2014 onwards, the non-utilisation value could be still on higher side and therefore, to utilise the given facility out of 5%, a maximum of 3% of the licence may be allowed for import of fabrics without keeping restriction of 1,000 metre, TEA said.