The Associated Chambers of Commerce and Industry (Assocham) has urged the government to remove the value-added tax (VAT) on fashion products with more than 50 percent handloom and handicrafts input to make them competitive in the global market.

"Indian fashion industry is at budding stage and accounts for barely 0.3 percent of international industry's networth, which may further come down in the absence of necessary government support," the chamber said in a letter to the finance ministry.

Currently, fashion products fall under the VAT net ranging between 8-12 percent that makes them costlier. Therefore, the government should remove VAT on the handloom and handicraft-based fashion products, said the industry lobby.

According to Assocham, the fashion design industry is expected to grow to Rs.800 crore in two-three years from Rs.300 crore now.

However, currently it is difficult to set up self-sustaining fashion hubs in the country because of the lukewarm market scenario and market dynamism.

"The government's support to it is the need of hour especially in the form of tax incentives and (the industry) also needs funding assistance," Assocham said.

The chamber said India should take lessons from other countries such as the US, France and South Africa on how to set up and run fashion hubs.