AEPC urges tax incentives, e-commerce reforms, and zero customs duty on machinery in Union Budget 2025 to boost India's apparel exports.

Apparel Export Promotion Council (AEPC) has urged the government to announce tax incentives in the upcoming Union Budget 2025. The incentives sought by the Council include removal of a provision requiring payments to MSMEs to be made within 45 days to claim deductions, and exempting garment machinery imports from customs duty on garment machinery imports.

AEPC has also requested the government to announce a 5 per cent interest equalization rate in the upcoming Budget, scheduled to be unveiled on February 1, 2025 by Finance Minister Nirmala Sitharaman.

The council’s other demands include extending the concessional tax rate for new manufacturing units to encourage setting up of new garment units; simplifying import procedure for trims and embellishments under IGCR (Import of Goods at Concessional Rate); and liberalizing e-commerce export procedures.

The Ready Made Garments (RMG) sector also demanded removal of Sec43B (H) of IT Act pertaining to payment to any MSME companies within a maximum 45 days' time to claim tax deductions. This Act not only increased tax liabilities but also disrupted the cash flow of exporters, says the sector

Further, the sector has demanded increasing the cap per consignment of export value under e-commerce to minimum Rs 25 lakh and extending the export realization period to 12 months.

India's garment export sector relies heavily on imported machinery to maintain quality and global competitiveness, as domestic production is insufficient to meet demand. High import duties make Indian garments exports less competitive vis-a-vis countries like Bangladesh and Vietnam. AEPC recommends continuing existing exemptions besides reducing the customs duty on remaining garmenting machinery to zero to enhance the sector's efficiency.

Sudhir Sekhri, Chairman, AEPC says, the Union Budget presents a great opportunity to the council to urge the government to consider its demands for long-term policy support.

The sector needs to adopt new strategies urgently to benefit from the reorientation of the evolving supply chain. It can outplace global competitors by upscaling its production capacity, channelizing investments, upskilling workforce and launching new labor reforms, adds Mithileshwar Thakur, Secretary, AEPC.