Textile industry seeks indirect tax cuts in interim Budget
February, 14th 2009
The Congress-led United Progressive Alliance is all set to announce its interim Budget on February 16. In the run up to the budget, the textile industry has sought indirect tax cuts.
Textiles industry expects that the governments interim budget is likely to contain some tax breaks for industry and sector-specific measures to stimulate a slowing economy. The Budget could address cut in indirect taxes more than direct taxes or change in major policies.
The PHD Chamber of Commerce and Industry or CCI was lobbying for a corporate tax rate cut to 20% from 30%. It hopes fringe benefit tax, dividend distribution tax and minimum alternate tax to be scrapped and the central sales tax abolished by 2010, instead of introducing uniform goods and Services Tax.
The members of CCI hope that the interim budget will focus on labour intensive and export oriented sectors, because demand for exports has gone down, so sectors like gems and jewellery, textiles etc., need to be revived with priority on protecting jobs.
The export lobby groups anticipate job losses of 10 million by March-end. Exports, which account for nearly 20% of India's gross domestic product, are expected to plummet by more than a fifth in January.
Textiles are the second largest exporter after IT and over 50% of the total textile production in the country is exported to the United States and the European Union.
Commenting on the same, Naishad Parikh, Head-Policy Initiatives, Arvind Mills said the textile industry profitability has gone down 75% in last two years and credit rating downgrades are seen in textile industry due to profitability erosion. Thus, we expect rollback of duty drawback in interim budget and some policy changes in interest rates levied on exporters.
Parikh said government must enable provisions for cotton price parity with international prices.