TEA proposes to remove permanently Reverse Charge Mechanism

TEA proposes to remove permanently Reverse Charge Mechanism

The Tiruppur Exporters Association (TEA) has suggested some pre-budget proposal to the Union Finance Minister, Arun Jaitley. The proposal states to remove completely the reverse charge mechanism (RCM), sufficient fund allocation for government schemes, increasing Investment limit for micro, small and medium enterprises (MSMEs). It also includes an establishment of a knitwear board and amending labour laws.

RCM implies that the GST is to be paid and deposited to the government by the recipient of goods and services and not by the supplier it made provision of purchases from unregistered dealers which is causing huge compliance burden especially to MSME clusters like Tiruppur where thousands os micro and small manufacturers and traders are unregistered.

TEA recommended allocating sufficient funds to all related governmental schemes to clear all pending dues at the earliest and providing the sector with necessary cash to tide over the working capital crisis. Fund allocation to the government’s Market Access Initiative (MAI) scheme may be doubled so that India gets more business opportunities, the TEA memorandum said.

The interest equalization for apparel exporters may be enhanced to 5 per cent and the duty drawback rates may be enhanced to 4 percent from the current 2 per cent to cover blocked credits so that the industry can compete the competition from Bangladesh, Vietnam, Cambodia and Ethiopia, which enjoy duty-free status with the European Union, the association said.

The investment limit for plant and machinery recommended by the TEA to be raised from the existing ceiling of Rs 25 lakhs to Rs 50 lakhs for micro enterprises, Rs 5 crore to Rs 10 crore for small enterprises and Rs 10 crore to Rs 30 crore for medium enterprises. There is also the need to focus a Knitwear Board stationed at Tiruppur generating over Rs. 35, 000 crore of business from the Tiruppur Cluster alone.

The proposal also registers amendments in the labour law regarding provident fund and pension, a central scheme for job creation in the sector, imposing 5 per cent GST on effluent treatment activity of apparel units instead of 18 per cent and exempting imports of accessories like zips and tags using the Export Promotion Certificate from the purview of international GST.

– Apparel and Textile News, Apparel Talk, Indian Apparel