Home » » TEXPROCIL

CHAIRMAN PAGE

India's economic growth momentum is likely to pick up further and the country is expected to clock GDP growth of 7.5 per cent in this financial year, as per the Morgan Stanley report. According to the global financial services major, the growth recovery will remain robust, supported initially by consumption and exports. In the January-March quarter, India's gross domestic product (GDP) grew at the fastest pace in seven quarters at 7.7 per cent on robust performance by manufacturing and service sectors as well as good farm output. In aggregate, the agency expects GDP growth to pick up to 7.5 per cent in this financial year as against 6.7 per cent in 2017-18 as stated in its research note. The report, however, noted that the risks to this growth outlook could stem from slower global growth or a rise in trade tensions impacting external demand.

Trade strain continues

The recent volatilities in global trading order have resulted in rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies. At the recently held G20 summit in Argentina, the world's 20 largest economies warned that growth, while still strong, was becoming less synchronized and downside risks over the short- and medium-term had increased thus raising the need to step up dialogue and actions to mitigate risks and enhance confidence amongst the trading community.

In recent months, the US economy as well as European economies are showing signs of revival. On the whole, the global economy appears to be in revival mode. Therefore, at this juncture, any trade conflict which goes beyond a certain point will definitely have negative impact on global growth. Free trade has been responsible for sustained global growth over the years, and protectionist tendencies going beyond a point, naturally will have adverse consequences on world economy.

Demand for Refund of accumulated credit

The GST Council in its 28th meeting held on July 26, 2018 recommended to allow refund of unutilised ITC to taxpayers in the Textiles Sector. Accordingly, CBIC issued Notification No. 20/2018 – Central Tax (Rate) dated July 26, 2018 to implement the above decision. However, the said Notification has stated that the accumulated credit lying unutilized as on July 31, 2018 will lapse.

This will lead to serious problems for the textiles sector as the costs will go up on the available stocks as on July 31, 2018”. Most of the dyes and chemicals, and packing materials used by the textiles sector attract 12% and 18% GST. Further, in the case of manmade fibre textiles, fibre and yarn attracts 18% and 12% GST respectively. Whereas, the GST rate on fabrics is only 5% leading to accumulated Input Tax Credit on account of inverted duty structure.

While the intention of the Government is to provide refund of accumulated Input Tax Credit on account of inverted duty structure to bring down the cost of the products, it appears some technical reasons such as bifurcating the input tax credit accumulations before 31.7.2018 and after August 1, 2018 for the purpose of refunds have led to the above decision to make the accumulated credits lying in balance as on July 31, 2018 become null and void. We have appealed to the Government to allow the accumulated Input Tax Credits on fabrics available with the weavers as on July 31, 2018 for adjusting GST payment on outward supplies – both for domestic and export supplies.

Transport Strikes disrupts textile supplies

On July 20, All India Motor Transport Congress (AIMTC) started a nationwide indefinite strike reiterating their demands including a reduction in central and state taxes by getting diesel under the GST so that price of the deregulated commodity can be reduced. The transport strike had started adversely affecting textiles exports leading to a sharp disruption in the movement of raw materials to the factories and finished goods to the ports for exports. Especially, in the case of Cotton textiles, raw cotton are mainly produced in Gujarat and Maharashtra whereas their consumptions are in the textiles units located in the Southern states of Tamil Nadu and Andhra Pradesh. The transport strike brought the movement of textile products to a standstill.

As all of us are aware that disruptive activities like these may have serious repercussions on the business. Especially, non-adherence of the strict shipment schedules given by the foreign buyers for exports can lead to loss of reputation in the international markets for many of the textile exporters apart from loss of business. The Council urged the Government to resolve this issue so that the strike gets called off at the earliest and textile exports, which otherwise is facing many other challenges, can meet the commitments made to the overseas buyers to supply their orders on time.

India’s Strategy for Global Trade

Taking a cue from the global developments, India has begun to formulate its strategies for trade with the global markets. In an effort to boost the textile industry, the Government has increased import duty on 328 textile products to 20 percent vide Notification No. 58/2018 – Customs dated 7.8.2018 issued by the Ministry of Finance, Government of India. There is no increase in the Customs duty on any of the Cotton textiles products (fibre, yarn, fabrics, made ups). The Customs duty has been increased on Carpets and Readymade Garments. As a result imported garments, fabrics, specialised fabrics and carpets, among others, will become costlier, which would benefit domestic manufacturing.

ATUFS was launched in January 2016 for a period of seven years in place of the erstwhile Technology Upgradation Fund Scheme (TUFS). The government provides credit linked subsidy under the scheme. The Ministry of Textiles, Government of India, has modified the financial and operational parameters and implementation mechanism of Amended Technology Upgradation Fund Scheme (ATUFS) vide Revised Resolution dated August 2, 2018. The revised scheme would facilitate improvement in productivity, quality, etc. The amended scheme is expected to encourage investments in the textile segment and will also help in more employment generation and boost exports in the textile sector.

Way forward

The recent volatilities in global trading order have resulted in rising financial vulnerabilities, heightened trade and geopolitical tensions, global imbalances, inequality and structurally weak growth, particularly in some advanced economies. At the recently held G20 summit in Argentina, the world's 20 largest economies warned that growth, while still strong, was becoming less synchronized and downside risks over the short- and medium-term had increased thus raising the need to step up dialogue and actions to mitigate risks and enhance confidence amongst the trading community.

In recent months, the US economy as well as European economies are showing signs of revival. On the whole, the global economy appears to be in revival mode. Therefore, at this juncture, any trade conflict which goes beyond a certain point will definitely have negative impact on global growth.

Friends, we must come to bear the fact that ‘Free Trade’ has been responsible for sustained global growth over the years, and protectionist tendencies going beyond a point, naturally will have adverse consequences on world economy. It needs to be emphasized that the world economy cannot afford another era of slow growth, therefore making it necessary that all countries act in a spirit of cooperation and resolve — the trade issue bilaterally or multilaterally.

INDIAN TRADE PORTAL