ANNOUNCEMENT 22 Jun 2016

In June 2016, the government of India announced a targeted tax change.

NUMBER OF INTERVENTIONS

2

  • 2 harmful
  • 0 neutral
  • 0 liberalising

SOURCE



Official press release
http://pib.nic.in/newsite/erelease.aspx?relid=146422

The Hindu - Rs. 6,000 crore special package for textiles
http://www.thehindu.com/news/national/cabinet-brief-on-textiles/article8760243.ece


Notification Scheme for Rebate of State Levies on Exports of Garments
http://egazette.nic.in/WriteReadData/2016/171272.pdf


Rates of Rebate
http://egazette.nic.in/WriteReadData/2016/171314.pdf



Inception date: 22 Jun 2016 | Removal date: open ended
Still in force

Tax or social insurance relief

On 22 June 2016, the Government of India approved a package for the Textiles and Apparel sector. According to the official press release, these measures are expected to promote "employment generation, economies of scale and boost exports." As per news reports, the package is in excess of INR 6000 crore (~USD 901.883 million*).

  • The government will increase its contribution from 8.33% to 12% and thus will bear the entire burden of the employer in the Employers Provident Fund Scheme for new employees in the garment industry, for the first 3 years, who are earning less than INR 15,000 per month
  • To promote employment, the Employers Provident Fund Scheme is made optional for employees earning less than INR 15,000 per month
  • Subsidy under the Technology Upgradation Fund Scheme has been increased from 15% to 25%. Moreover, the disbursement of the subsidy has been moved from input to output based, in this case reaching the number of expected jobs.
  • Considering the seasonality of employment, certain favorable changes have been introduced in the Income Tax Act to accomodate additional wagae payment deductions.

 
 * Rate of conversion at INR 66.53 / USD
 

AFFECTED PRODUCTS

 
500200 500300 500400 500500 500720 500790 510119 510121 510129 510211 510529 511111 511120 511211 520100 520299 520511 520528 520548 520819 520822 520831 520832 520841 520842 520843 520851 520852 520911 520921 520931 520932 520942 521031 521041 521142 521212 521213 530121 530129 530310 530390 530500 530610 530620 530710 530720 530890 530911 530919 530921 530929 531010 531100 540110 540120 540211 540219 540220 540231 540232 540233 540239 540244 540245 540246 540247 540249 540251 540252 540261 540269 540331 540332 540339 540349 540411 540419 540490 540710 540720 540730 540742 540751 540752 540753 540754 540761 540769 540782 540822 540824 540832 550110 550120 550130 550200 550311 550319 550320 550330 550340 550390 550410 550490 550510 550810 550912 550921 550922 550931 550932 550941 550942 550951 551011 551090 551211 551219 551323 551511 551513 551519 551612 551613 551614 551622 551623 560122 560130 560311 560312 560313 560314 560391 560392 560393 560394 560721 560750 560790 560811 570110 570242 570320 570330 570500 580122 580137 580410 580421 580429 580610 580620 580631 580632 580639 580710 580790 580890 581091 581092 581099 590210 590220 590310 590320 590390 590610 590699 590700 590900 591000 591110 591120 591131 591132 591190 600110 600192 600290 600410 600490 600531 600532 600533 600542 600590 600622 600631 600632 600633 600634 600642 600690 610333 610342 610343 610433 610443 610444 610462 610463 610469 610510 610610 610620 610821 610822 610832 610910 610990 611020 611030 611120 611190 611430 611510 611529 611599 611610 611692 611699 611710 611780 611790 620193 620213 620311 620312 620329 620331 620333 620342 620343 620349 620433 620442 620443 620444 620449 620462 620463 620469 620520 620590 620630 620640 620920 620990 621010 621040 621050 621210 621290 621710 621790 630140 630190 630222 630229 630399 630419 630491 630492 630499 630510 630710 630790 630900 631010 631090
(+ 262 more)
Inception date: 20 Sep 2016 | Removal date: 06 Mar 2019
Still in force

Tax-based export incentive

A scheme called the Scheme for Rebate of State Levies on Export of Garments 2016 has been announced to provide a rebate of State Levies imposed on exports of garments. The Scheme will be applicable from 20 September 2016 for a period of 3 years. An official Notification was published by the Minsitry of Textiles on 12 August 2016 (No. 12020/03/2016-IT). The current Scheme was rescinded and a new Scheme with revised rates has been announced on 7 March 2019 (see related State Act).

The scheme aims to provide a rebate of the State Levies paid on exports of garments in addition to the rebate on Central Taxes that is provided by the Duty Drawback Scheme. The levies are understood to include State Value Added Taxes, Sales Tax on inputs, fuel, duty on electricity generation for the final product and the accumulated duty over the stages of production. According to the Press Release the tax rebate is expected to cost INR 5500 crore (USD 826.73 million)*.

The rebate rates notified will be calculated on Free on Board value of the exported goods.

Notification No.12020/03/2016-IT published on 13 August 2016 specifies the rebate rates for the exports of the said goods. Two rates have been specified, a lower rate if the fabric (including interlining) used in the production has been imported under the Special Advance Authorisation Scheme and a higher rate if not. The Advance Authorisation Scheme allows duty free imports of raw materials for manufacturing of export goods.

* INR to USD conversion as on 22 June 2016 - INR 67.50 / USD