Textile and Garments

SUMMARY

• Second largest textile fibre producer in the world.
• India is the largest cotton and jute producer in the world.
• Nine million tonnes of fibre production in 2015-16.
• Second largest textile manufacturing capacity globally.
• India accounts for 18% of world's spindles and 9% of the world's rotor.
• 5% share in global textiles and apparel trade.

FDI POLICY

· 100% FDI is allowed under the automatic route in the textile sector; investment is subject to all applicable regulations and laws.

SECTOR POLICY

The Government of India has launched the following initiatives to strengthen textile production and encourage this Industry to cater to the domestic and international market efficiently.

1. Technology Upgradation Fund Scheme (TUFS)

o TUFS has infused investment of more than USD 41.33 billion in the industry. Support has been provided for modernisation and up-gradation by providing credit at reduced rates and capital subsidies.

2. Scheme for Integrated Textile Parks (SITP)

o Scheme will provide funding for infrastructure, buildings for common facilities like design & training centre, warehouse, factories and plant & machinery, till now 74 textiles parks have been approved and are at various stages of implementation with 18 parks operational, 32 under implementation. The investment of USD 692 million is sanctioned by the government which will create 66,000 jobs.

3. Integrated Processing Development Scheme (IPDS)

o IPDS is being implemented to make Indian textiles more competitive and environment-friendly.

4. Integrated Skill Development Scheme (ISDS)

o ISDS plans to bridge that skill gap by training 1.5 million people for which USD 300 million has been allocated by the government.

5. Amended Technology Upgradation Fund Scheme for textiles industry (ATUFS)

o ATUFS is designed to provide incentives to entrepreneurs and business owners for upgrading technologies. ATUFS facilities are expected to receive an investment of USD 15 billion and create 3 million jobs in the country.

6. Market Access Initiatives (MAI)

o MAI was launched to promote the Indian exports in a sustained manner. The scheme funds various market studies and surveys to assist exporters.

7. Market Development Assistance (MDA)

o To encourage exporters to conduct promotional activities for their products.

8. Technology Mission for Technical Textiles (TMTT)

o TMMT has two mini-missions to create a healthy ecosystem for the production of technical textiles in India. The Mini Mission I of the plan aims at standardisation, creating common testing facilities and several resource centres with IT infrastructure. Under Mini Mission II, support will be provided to create domestic and export markets for the technical textiles.

9. Special package for Textile and Apparel sector

o To boost exports, labour-friendly policies, scaling up the production and to generate over 10 million jobs in the textile industry over the period of next three years.

Implications of Goods and Services Tax (GST) for Indian Textiles Sector

o GST will result in ‘Fibre-neutrality effect’ on the Indian textiles sector, according to the Ministry of Textiles, that means all man-made and natural fibres will be treated equally from the tax point of view.

FINANCIAL SUPPORT

KEY PROVISIONS OF BUDGET 2016-17:

• Basic Customs Duty on certain speciality fibres and yarns has been reduced from 5% to 2.5%. Basic Custom Duty has been exempted on import of certain fabrics of value equivalent to 1% of Free on Board (FOB) value of exports in the preceding year for the manufacturing of textile for exports.
• The Excise Duty of 2% without CENVAT credit and 12.5% with Central Value Added Tax (CENVAT) credit have been imposed on branded readymade garments and made up of price USD 15.38 or more.
• The tariff value of readymade garments and made up articles of textiles has been changed from 30% of the retail sale price to 60% of the retail sale price.
• The Excise Duty has been increased from 6% to 12.5% with CENVAT credit on re-cycled Polyester Staple Fibre and Polyester Filament Yarn.

Recent Packages provided to the sector:

The Outlay for Ministry of Textile is of USD 515.39 million (including USD 51.5 million for North Eastern Region, USD 25.77 million for Scheduled Caste Sub-Plan and USD 6.18 million for Tribal Sub-Plan) which is mainly for:

• Amended Technology Upgradation Fund Scheme (USD 227.7 million)
• National Handloom Development Programme (USD 84.15 million)
• National Handicraft Development Programme (USD 33.69 million)
• Development of Woollen Textiles (USD 4.46 million)
• Development of Silk Industry (USD 26.54 million)
• Power Loom Promotion Scheme (USD 17.7 million)
• Textile Infrastructure (USD 24.25 million)
• Research & Capacity Building including National Institute of Fashion Technology (USD 47.51 million)
• NER Textiles Promotion Scheme including Scheme for the usage of Geo Textile in North Eastern Region & Scheme for Promoting Agro Textiles in North East (USD 39.88 million), etc.

Tax Incentives:

• Presumptive taxation scheme under section 44AD of the Income Tax Act available for small and medium enterprises with turnover or gross receipts not exceeding USD 0.15 million has been enhanced to USD 0.30 million.
• The corporate income tax rate for the next financial year of the companies with turnover not exceeding USD 0.76 million (in the financial year ending March 2015) has been lowered from present rate of 30% to 29%, plus surcharge and cess.
• Service tax is exempted on services provided under Deen Dayal Upadhyay Grameen Kaushalya Yojana (DDU GKY) and services provided by Assessing Bodies empanelled by Ministry of Skill Development & Entrepreneurship.
• Higher drawback rate has been provisioned from 1.7.2012 onwards under notification No. 41/2012.

State Incentives:

• Apart from the above, each state in India offers additional incentives for industrial projects. Some of the states also have separate policies for the textiles sector.
• Incentives are in areas like subsidized land cost, relaxation in stamp duty exemption on sale/lease of land, power tariff incentives, concessional rates of interest on loans, investment subsidies/tax incentives, backward areas subsidies and special incentive packages for mega projects.

Export Incentives:

• Export Promotion Capital Goods Scheme (EPCG).
• Duty Exemption & Remission Scheme.
• Merchandise Exports from India Scheme (MEIS).

Area-based Incentives:

• Incentives for units in Special Economic Zones(SEZs) / National Investment & Manufacturing Zones(NIMZs) as specified in respective acts or the setting up of projects in special areas such as the North-East, Jammu & Kashmir, Himachal Pradesh & Uttarakhand.

INVESTMENT OPPORUNITIES

• The entire value chain of synthetics
• Value-added and speciality fabrics
• Fabric processing set-ups for all kind of natural and synthetic textiles
• Technical Textiles
• Apparel
• Retail brands