The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 27 DECEMBER, 2021

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INTERNATIONAL

 

Ecommerce rules to safeguard consumer rights: Piyush Goyal

The ecommerce rules under the Consumer Protection Act, being drafted by the ministry of consumer affair, are aimed at safeguarding consumer rights without affecting the convenience that ecommerce provides, said Piyush Goyal, Union Minister of Consumer Affairs, Food & Public Distribution, Textiles and Commerce & Industry. The ecommerce rules under the Consumer Protection Act, being drafted by the ministry of consumer affair, are aimed at safeguarding consumer rights without affecting the convenience that ecommerce provides, said Piyush Goyal, Union Minister of Consumer Affairs, Food & Public Distribution, Textiles and Commerce & Industry. Emphasising on protection of consumer rights and ensuring quality to consumers he said, "Under leadership of Prime Minister, following the mantra of 'Consumer is King', we have transitioned from 'Consumer Protection' to 'Consumer Empowerment & Prosperity. He said that the consumers should demand good quality and should demand for protection of their rights. He was speaking at an event where he flagged off the National Test House Mobile Van for Drinking Water Testing. "Tomorrow (December 25) is the birthday of former PM, late Shri Atal Bihari Vajpayee which is also observed as the Good Governance Day. When we talk of Good Governance, the consumers-which includes 135 crore citizens are driving Aatmanirbhar Bharat by being Vocal for Local," he said.

Source: Economic Times

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Indian FM rejects textiles ministry proposal to defer GST hike

India’s finance minister Nirmala Sitharaman at a meeting today rejected the proposal put forward by the ministry of textiles to defer the increase in Goods and Services Tax (GST) from the current 5 per cent to 12 per cent on fabrics and other textile products. A similar request from the Confederation of All India Traders (CAIT) was also rejected. As a result, GST rates will go up as scheduled with effect from January 1, 2022, from 5 per cent to 12 per cent on all types of fabrics, and on garments with retail value below ₹1,000. The GST rate on man-made fibre, however, will come down from 18 per cent to 12 per cent. The rates on cotton, cotton yarn and synthetic yarn will remain unchanged at 5 per cent, 5 per cent, and 12 per cent respectively. The GST Council at its last meeting had decided to change the GST rate to address the inverted tax structure in the MMF textile value chain. The GST of 18 per cent, 12 per cent and 5 per cent levied on MMF, MMF yarn and MMF fabrics created build-up of credits and cascading costs, as the tax on inputs was at higher rates than finished products. This further led to accumulation of taxes at various stages of MMF value chain and blockage of crucial working capital for the industry. “Though there is a provision in the GST law to claim unutilised Input Tax Credit (ITC) as a refund, there were other complications and it resulted in more compliance burden. The inverted tax structure caused effective increase in rate of taxation of the sector. The world textiles trade has been moving towards MMF, but India was not able to take advantage of the trend as its MMF segment was throttled by inverted tax regime,” the ministry of textiles had said while announcing the change in GST structure last month “The uniform rate of 12 per cent is likely to contribute positively to the growth of the sector by helping save a lot of working capital and reducing the compliance burden of the industry players. It will be helpful in resolving the ITC residues that accumulated due to the inverted tax structure earlier,” the ministry had said. On the decision to uniformly tax all garments at 12 per cent, the ministry said that differential rates for garments create problems in compliance of tax regime. “MMF garments cannot be identified easily and cannot be taxed differently, hence there is a need for uniform rate. Uniform rate makes it simple and since there is so much high potential of value addition in garment segment, the increase in rate is likely to be absorbed in value addition. It will provide clarity to the industry and settle, once and for all, the issues caused by inverted tax structure.” However, industry experts feel that the uniform rate will lead to smaller players being pushed into the unorganised sector, as it will make harder for the sector to keep afloat. So, few textile bodies had made representations to the textiles ministry to defer/cancel the hike in GST rate from 5 per cent to 12 per cent on fabrics, and garments costing below ₹1,000. This request now stands rejected.

Source: Fibre 2 Fashion

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Amit Mitra urges PM to call GST meet to reverse tax hike on textiles

He had accused the Centre of not discussing the issue in the GST council before announcing the hike Former West Bengal finance minister and now advisor to the state Chief Minister, Amit Mitra on Sunday urged Prime Minister Narendra Modi to convene an urgent meeting of the GST Council to revert a hike in tax on man-made fibre textiles. In a tweet Mitra said, "Modi Govt will commit another blunder on Jan 1. By raising GST on (man-made) Textiles (from) 5 per cent to 12 per cent, 15 million jobs will be lost and 1 lakh units will close. Modi ji, call a GST Council meeting now and reverse decision before sword of Damocles falls falls on the head of millions of people." The union government had notified an increase in GST on natural fibre products from 5 per cent to 12 per cent, including apparels in the lower tax bracket with effect from January 1, 2022. The former finance minister on December 24 at a media meet had urged the Union Finance Minister Nirmala Sitharaman to similarly convene an urgent meeting of the GST Council to rescind the seven per cent tax hike in GST on the textiles sector to prevent job loss and closure of small units. "If the tax (hike) is not reversed then the impact will be huge with job loss to 15 lakh (1.5 million) people, including those engaged in ancillary industry and closure of one lakh small units. A lot of units will revert to the informal sector, Mitra had told reporters during the meet. However in his tweet put out on Sunday the job loss figure was placed at 15 million. The total number of jobs in India's textile sector is placed at 45 million by the India Brand Equity Foundation a trust founded by the Ministry of Commerce and Industry. Mitra had pointed out that the textile trade's natural fibre segment constitutes 80 per cent of the Rs 5.4 lakh crore sector and its net profit margin is between one and three per cent making it vulnerable to any kind of cost increase. The cotton sector is already reeling under 70 per cent inflation, he had claimed, adding that the government estimate of earning an additional Rs 7,000 crore from raising the tax is mythical as a lot of units may shut down as a direct consequence of the tax hike. He had accused the Centre of not discussing the issue in the GST council before announcing the hike.

Source: Business Standard

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Shri Piyush Goyal calls for greater focus on nurturing entrepreneurship in Tier 1 and Tier-2 cities of India

The Minister of Commerce and Industry, Consumer Affairs, Food and Public Distribution and Textiles, Shri Piyush Goyal today called for greater focus on nurturing entrepreneurship in the Tier 1 and Tier 2 cities of India. He was delivering the Keynote Address at the 3rd Meeting of National Startup Advisory Council virtually today. It may be noted that 45% startups in India are from Tier 2 and 3 cities and 623 districts have at least 1 recognized startup. From 2018-21, almost 5.9L Jobs have been created by startups. In 2021 alone, almost 1.9L jobs have been created. Department for Promotion of Industry and Internal Trade (DPIIT) had constituted the National Startup Advisory Council to advise the Government on measures needed to build a strong ecosystem for nurturing innovation and startups in the country to drive sustainable economic growth and generate large scale employment opportunities. Besides the ex-officio members, the council has several non-official members, representing various stakeholders such as founders of successful startups, veterans who have grown and scaled companies in India, persons capable of representing interests of investors, incubators and accelerators into startups, representatives of associations of stakeholders of startups and representatives of industry associations. The Minister said that 25th December, the birth anniversary of former Prime Minister Shri Atal Behari Vajpayee, is being celebrated as Good Governance Day in India. He expressed the hope that a robust Startup ecosystem would help formalize the economy and help in improving the Ease of Living and the Ease of Doing Business and in turn help promote the ideals of Good Governance. He observed that ‘Startup India’ movement had brought a ‘change in mindset’ from ‘can do’ to ‘will do’ and helped us move past traditional notions of entrepreneurship. The Minister said that our startups turned COVID-19 crises into an opportunity and made 2021 the Year of unicorns with 79 Unicorns now thriving. Underscoring that India is now home to the 3rd largest startup ecosystem in the world, Shri Goyal said that he believed in the power of ideas. Simple solutions can make an extraordinary impact, he added. Quoting Prime Minister Shri Narendra Modi, Shri Goyal said that the priority of the Government can be expressed in four words, “Minimum Government, Maximum Governance” and called for minimum Government interventions in the lives of citizens. He said that our vision is to build a New India committed to the economic progress and well-being of 135 crore Indians, especially those who have been left behind. The Minister assured that the Government, as an enabler, is committed to develop a robust startup ecosystem by providing exceptional benefits such as 80% rebate in patent filing and 50% on trademark filing, relaxation in public procurement norms, SelfCertification under Labour and Environment Laws, Funds of Funds for startups of Rs. 10,000 Crore, Income Tax exemption for 3 out of 10 years, Seed Fund Scheme of Rs. 945 Cr and creating Open Network for Digital Commerce (ONDC), which will create new opportunities and remove some monopolistic tendencies in certain spheres. Shri Goyal said that apart from mass jobs creation, our startups have the potential to catalyse India’s integration in Global Value Chains and increase our footprint in global markets. He urged successful entrepreneurs, especially unicorns to share their experiences with students and youth in order to inculcate startup culture and entrepreneurial spirit at grassroot levels, especially in regions like the North East of India. He asked academia, government and industry to work hand in hand to promote entrepreneurship at the grassroots level. Urging the youth to take risks in entrepreneurship, the Minister said that you never know until you try, therefore, making mistakes should be normalised and failures should not be seen as the end of entrepreneurial journey. We must learn to celebrate failure too, he added. Shri Goyal called upon startups to explore the unexplored areas like rural tourism in terms of agri-stays, hotels and homestays that would help create additional income for farmers. Shri Goyal opined that the youngsters of the nation must be encouraged to visit villages, experience rural life and come up with solutions to rural problems. He also asked successful startups to focus on rural economy and work on solutions such as drip irrigation, natural farming etc. to improve the lives of farmers. Speaking of the need to augment Seed Capital, Shri Goyal said that we must encourage the flow of domestic capital in our startups. He added that there was a need to make ‘Startup India’ a symbol of Self Reliance and Self Confidence. The Minister called for a participative approach from all stakeholders to achieve such an ambitious target. Six national programmes were presented to the Minister as part of the third National Startup Advisory Council meeting to strengthen the startup ecosystem in the country. The key interventions discussed were National Capacity Building Programme for Incubators, providing thrust to the startups engaged in manufacturing sector, empowering the larger pool of Family Offices and High Networth Individuals (HNIs) to invest in startups, accelerating Deep-tech Startups which would act as a catalyst in empowering pioneers, establishing an international platform and a gateway for Indian startups to go global, propelling participation of women in the startups and a holistic programme which aims at enabling global mentorship, market access, international opportunities and B2B connects. The video conference was attended by several Startup leaders, investors, banks, senior government officials representing various ministries/departments and key stakeholders of the startup ecosystem.

Source: PIB

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India imposes antidumping duty on 5 Chinese goods for 5 years

India has imposed antidumping duties on five Chinese products, including certain aluminium goods and some chemicals, for five years to guard local manufacturers from cheap imports India has imposed antidumping duties on five Chinese products, including certain aluminium goods and some chemicals, for five years to guard local manufacturers from cheap imports from the neighbouring country. According to separate notifications of the Central Board of Indirect Taxes and Customs (CBIC), the duties have been imposed on certain flat rolled products of aluminium; sodium hydrosulphite (used on dye industry); silicone sealant (used in manufacturing of solar photovoltaic modules, and thermal power applications); hydrofluorocarbon (HFC) component R-32; and hydrofluorocarbon blends (both have uses in refrigeration industry). These duties were imposed following recommendations of the commerce ministry's investigation arm Directorate General of Trade Remedies (DGTR). The DGTR in separate probes have concluded that these products have been exported at a price below normal value in Indian markets, which has resulted in dumping. The domestic industry has suffered material injury due to the dumping, the DGTR has said. "The anti-dumping duty imposed under this notification (on Silicone Sealant ) shall be levied for a period of five years (unless revoked, superseded or amended earlier) from the date of publication of this notification in the Official Gazette and shall be payable in Indian currency," the CBIC has said. The CBIC has also imposed the duty on a vehicle component - Axle for Trailers in CKD/SKD (complete and semi knocked down) to protect domestic makers from cheap Chinese imports. Similarly it has also slapped the duty on imports of calcined gypsum powder from Iran, Oman, Saudi Arabia and United Arab Emirates (UAE) for five years. While DGTR recommends the duty to be levied, the finance ministry imposes it. Countries initiate anti-dumping probes to determine if the domestic industry has been hurt by a surge in below-cost imports. As a counter-measure, they impose duties under the multilateral WTO regime. Anti-dumping measures are taken to ensure fair trade and provide a level-playing field to the domestic industry. Both India and China are members of the Geneva-based World Trade Organisation (WTO). India has initiated maximum anti-dumping cases against dumped imports from China. India's exports to China during the April-September 2021 period were worth USD 12.26 billion while imports aggregated at USD 42.33 billion, leaving a trade deficit of USD 30.07 billion.

Source: Business Standard

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Hiking GST on handlooms, textiles will ring death knell for industry: TRS

The working president of ruling TRS in Telangana K T Rama Rao urged Prime Minister Narendra Modi to intervene in the matter to save weavers The working president of ruling TRS in Telangana K T Rama Rao on Friday claimed that the enhancement of GST on handlooms and textiles from five to 12 per cent would be a death knell for the industry. Rama Rao, State Minister for Industries, urged Prime Minister Narendra Modi to intervene in the matter to save weavers. "Hon'ble @narendramodi Ji, on the national handloom day you had talked of strengthening #Vocal4Handmade. Contrary to the idea, your govt has enhanced GST on Handlooms & Textiles from 5 to 12 % which will be a death knell for the industry. Request you to intervene & save weavers," Rama Rao, son of Chief Minister K Chandrasekhar Rao, tweeted.

Source: Business Standard

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Commerce Ministry for imposing anti-dumping duty on a chemical from four nations

The commerce ministry's investigation arm DGTR has recommended imposition of antidumping duty on caustic soda, used in diverse industrial sectors, for five years from Japan, Iran, Qatar and Oman, to guard domestic players from cheap imports. The Directorate General of Trade Remedies (DGTR) has recommended the duty after concluding in its probe that the product has been exported at dumped prices into India, which impacted the domestic industry. "The authority considers it necessary to recommend imposition of definitive antidumping duty...for a period of five (5) years on all imports of the goods...from Japan, Iran, Oman and Qatar from the date of notification to be issued in this regard by the central government," the directorate has said in a notification DGTR had conducted the probe following a complaint from Alkali Manufacturers Association of India (AMAI), which had requested for a probe. The recommended duty ranges between USD 8.32-8.61 per Dry Metric Tonne (DMT). The finance ministry takes the final decision to impose duty. "The authority is of the view that imposition of antidumping is required to offset dumping and injury," the notification said. The imposition of anti-dumping duty is permissible under the World Trade Organization (WTO) regime. The duty is aimed at ensuring fair trading practices and creating a level-playing field for domestic producers vis-a-vis foreign producers and exporters.

Source: Economic Times

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Spinning into GST quagmire

Ever since the goods and services tax (GST) council has proposed to change the GST rate on textile and apparel from 5% to 12%, apparel manufacturers are in jitters, and have raised red flags over an adverse impact on the industry time and again. This will particularly affect the demand for affordable clothing because apparel above Rs 1,000 was already taxed at 12% whereas that below Rs 1,000 — which is widely sold was taxed at 5%. With the proposed revision, affordable garments will become costlier, and manufacturers fear that it will not just impact domestic demand in a big way but in turn even hit production. Industry leaders express fear that the government’s plan to increase revenues through higher GST will backfire and will bring down the tax collection from current levels. Several representations have been made by industry associations comprising retailers, apparel makers and textile industry stakeholders urging the government to revoke the proposed change in the GST rate. Despite concerns expressed by the industry, the Union government is unlikely to defer implementation of the higher GST rate on certain textile products, as the decision was taken by the GST council, according to the Union finance ministry. "A delegation of the textile industry from the city tried to explain to the government about the adverse impact. Around Rs 4,500 crore has been invested for upgradation by the industries here and the hike in GST will give a major blow to them," said Bharat Gandhi, chairman, Federation of Indian Art Silk Weaving Industry (FIASWI). Clothing manufacturers and retailers fear that costlier apparel will cause a decline in demand for apparel. "The cost of apparel has already gone up by a sizeable 20-25% since Diwali in the wake of costlier raw materials and increased job work charges. With a surge in GST rates, there will be a further increase in the price of apparel, particularly those in the affordable segment," said Arpan Shah, honorary treasurer, Gujarat Garment Manufacturers’ Association (GGMA). "Costlier apparel will dent demand because the purchasing power of consumers has not dramatically improved over the past year and a half. We saw good demand during Diwali purely due to the festive season and pent-up demand, and post that, there is already a reduction in demand," said Shah.

Slowing demand likely to affect employment During the Diwali festive season, apparel makers did good business fuelled by pent-up demand. Estimates by Clothing Manufacturers’ Association of India (CMAI) suggest that most retailers earned 90% of their festive season revenues during preCovid period. "Already with rising cases of Covid-19 and concerns over the Omicron variant, the consumer sentiment has dampened yet again with retail sales declining. At a time when industry was barely recovering from the pandemic-induced slowdown after a year and a half, a rise in taxation and costlier commodity will only derail this recovery further," said Rahul Mehta, chief mentor, CMAI. In fact, a study commissioned by CMAI projects that some 7 lakh jobs in the textile and apparel industry across the country will be lost over the next year if the tax rates go up. Industry players have also voiced concerns over unfair competition from players who are not under the ambit of GST. "The idea behind introducing the new tax rate was to give relief to textile industry players from an inverted duty structure. However, as per our findings, only 20% of the industry is impacted by an inverted duty structure and such a decision to increase tax rate will prove detrimental for 80% of the industry," Mehta further added.

Plunging demand may hit production Textile and apparel makers suggest a decline in apparel demand is expected to impact production in turn as well. Estimates by GGMA suggest that garment makers are already operating at 60% of the production capacity since Diwali. "With fewer sales, the production cycle will also be impacted to a great extent. With fresh concerns over Omicron variant, export order volumes may take a hit and it will be a double whammy for manufacturers if domestic demand also further declines," said Chintan Thaker, chairman, Assocham Gujarat State Council. Industry estimates suggest that textile production may drop by 30% in the wake of reduced demand and increased working capital needs.

Retailers to take a big blow Market insiders explain that the impact of the tax hike will be maximum on traders and retailers. Retailers sell products at competitive rates with a margin of 2-5% net profit and with the hike in tax they will be most impacted. "Small businesses will face tough situations as they need investment to buy products and pay taxes in advance while they get payment as per the credit cycle. All textile traders’ associations across India have opposed the hike," said Champalal Bothra, general secretary, Federation of Surat Textile Traders Association (FOSTTA). "The textile products have already become costly due to rising costs and with an increase in tax will result in scared customers," said Sanjay Mehta, a fabric shop owner in Jhabua of Madhya Pradesh. Working capital need may go upIndustry stakeholders also warned of the dumping of cheaper textile products from neighbouring countries. The most common worry of all segments of the industry is the requirement of working capital. "We have a credit and payment cycle up to five months. A weaver or trader will have to pay GST for the same month, but one will get paid after three months or more. To avoid blocking a big amount they will reduce the size of business or start evading tax," said Ashok Jirawala, president, Federation of Gujarat Weavers Welfare Association (FOGWA).

Source: Times of India

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On trade, action must match intent

A higher level of ambition on FTAs good, but for this, India must open up its domestic markets to partners India is on track to meet an ambitious export target of $400 billion this fiscal. No doubt, what is aiding this effort is the focused drive of the Union commerce ministry to fix targets for each of the top 30 markets instead of only setting a full-year-goal. As this newspaper has reported, the ministry has followed it up with regular meetings with stakeholders and overseas missions for interventions to enable exporters to benefit from the recovery in global trade. In the first seven months of this fiscal, outbound shipments ideally should be 55-58% of the full-year-target. By this reckoning, exports to UAE, Singapore, UK, Netherlands, Germany, Nepal, Malaysia and Turkey fell short, achieving 32-44% of the full-year target. This was offset by robust growth in shipments to US, China, Bangladesh, Belgium, Saudi Arabia and Indonesia, by 62-71%. India’s overall exports thus hit $234 billion during April-October 2021 or 59% of the full-year target. What will definitely bolster India’s export drive to its top 30 markets are free trade agreements (FTAs) with the US, European Union, UAE, the UK and Australia, for instance. The higher level of ambition in this regard was flagged by BVR Subrahmanyam, commerce secretary, when he cautioned India Inc to brace for competition as the country was going to sign “very deep” FTAs. “To make FTAs realistic and compliant with World Trade Organization norms, we need to have at least 90% of trade covered under substantial liberalisation. We can’t be cherry picking. It will be a deep integration of economies. There will be some sensitive lines, of course. In the Indian context, dairy, for example, is a sensitive area. By and large, these are going to be very deep FTAs,” he stated while addressing Confederation of Indian Industry’s Partnership Summit. This higher level of ambition should be welcomed as India has not signed any major FTA in the last 10 years. Despite the intent to ink deep agreements, India remains ambivalent about full-fledged FTAs due to higher domestic tariffs in some of the most trade-dynamic sectors and manufacturing as a whole. For such reasons, India in the past has hesitated to offer “substantially all trade” interpreted as “80-85% or more” preferential tariff line liberalisation in its FTAs and settled for limited deals according to professor Amita Batra of the Jawaharlal Nehru University. India and Australia thus have decided to expedite negotiations for an interim agreement. The passage to a full-fledged FTA with Australia, however, is far from easy. Bilateral negotiations have been ongoing since 2011 and an important sticking point is India’s reluctance to open up its market for farm and dairy products. The domestic dairy industry’s apprehensions of stiff competition in milk and milk products from Australia and New Zealand were responsible in large part for India to walk out of the Regional Comprehensive Economic Partnership. As Australia and New Zealand are part of this regional grouping, a full-fledged FTA with India would necessarily entail the latter making a similar level of preferential tariff line liberalisation. Australia, Brazil and Guatemala also secured a WTO ruling in their favour, that India’s price support to sugarcane farmers violates the Agreement on Agriculture. FTA negotiations entail a process of give and take for greater access to each other’s markets. If India seeks greater market access, it must also allow partners to sell more of their goods and services .The need is to mutually lower tariff and non-tariff barriers for trade to be a win-win situation for both partners so that FTAs can boost India’s outward shipments manifold to its top 30 markets in the future.

Source: Financial Express

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Host of changes in GST law to come into effect from January 1, 2022

The GST regime will see a host of tax rate and procedural changes coming into effect from January 1, including liability on e-commerce operators to pay tax on services provided through them by way of passenger transport or restaurant services. The GST regime will see a host of tax rate and procedural changes coming into effect from January 1, including liability on e-commerce operators to pay tax on services provided through them by way of passenger transport or restaurant services. Also, the correction in inverted duty structure in footwear and textile sectors would come into effect from Saturday wherein all footwear, irrespective of prices, will attract GST at 12 per cent while all textile products, except cotton, including readymade garments will have 12 per cent GST. While the passenger transport services provided by auto rickshaw drivers through offline/ manual mode would continue to be exempt, such services when provided through any e-commerce platform would become taxable effective January 1, 2022, at 5 per cent rate. The procedural changes that would come into effect include e-commerce operators, such as Swiggy and Zomato, being made liable to collect and deposit GST with the government on restaurant services supplied through them from January 1. They would also be required to issue invoices in respect of such services. There would be no extra tax burden on the end consumer as currently restaurants are collecting and depositing GST. Only, the compliance of deposit and invoice raising has now been shifted to food delivery platforms. The move comes after government estimates showed that tax loss to exchequer due to alleged underreporting by food delivery aggregators is Rs 2,000 over the past two years. Making these platforms liable for GST deposit would curb tax evasion. The other anti-evasion measures which would come into effect from the new year include mandatory Aadhaar authentication for claiming GST refund, blocking of the facility of GSTR-1 filing in cases where the business has not paid taxes and filed GSTR-3B in the immediate previous month. Currently, the law restricts filing of return for outward supplies or GSTR-1 in case a business fails to file GSTR-3B of preceding two months. While businesses file GSTR-1 of a particular month by the 11th day of the subsequent month, GSTR-3B, through which businesses pay taxes, is filed in a staggered manner between 20th-24th day of the succeeding month. Also the GST law has been amended to allow GST officers to visit premises to recover tax dues without any prior show-cause notice, in cases where taxes paid in GSTR-3B is lower based on suppressed sales volume, as compared to supply details given in GSTR-1. The move would help curb the menace of fake billing whereby sellers would show higher sales in GSTR-1 to enable purchasers to claim input tax credit (ITC), but report suppressed sales in GSTR-3B to lower GST liability.

Source: Business Standard

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Vietnam seen as manufacturing hub for global brands

During the fourth wave of the Covid-19 pandemic from June until September 2021, several fashion brands began to gradually move production and orders away from Vietnam. This decision was made so as to reduce transport costs and adjust to the disruption in the supply chain, which has become a serious concern for many export-import businesses. Nonetheless, Vietnam still remains a huge manufacturing hub for several global fashion giants. Vietnam role in supply chain The Japanese fashion brand Uniqlo is familiar to many Vietnamese consumers. It opened its first shop in Vietnam in December 2019, and it has since opened nine retail shops in Hanoi and Ho Chi Minh City, along with a recently opened online shop. Uniqlo will certainly expand its business in Vietnam in the next few years, because Vietnam is considered a big market by the company due to its large young population, high per capita income, and a growing middle class. Furthermore, Vietnam is the second biggest manufacturing base for Uniqlo. In particular, Uniqlo purchases products of 45 Vietnamese apparel companies for the domestic and international markets. The company highly values the improved quality of the Vietnamese workforce. The Vietnamese textile and footwear industry has become more and more important in the global supply chain of several international giants. The world famous brands Nike and Adidas are buyers from about 200 Vietnamese suppliers. For instance, Vietnam provides 30 percent of the products that Adidas supplies to the global market. Even during the peak of the Covid-19 pandemic in Southern Vietnam, Nike still trusted the Vietnamese suppliers the most. Viettien Garment Corporation, for instance, has not lost a single order from Nike despite the impact of the Covid-19 pandemic. The latest figures from the World Trade Statistical Review 2021 released by the World Trade Organization show that Vietnam has overtaken Bangladesh to becoming the world's second largest exporter of readymade garments, reaching a market value of US$29 bn in 2020, just behind China. Garments made in Vietnam make up 4.6 percent of the world market. Vietnam has recently produced lots of high quality garments because of the improved quality of its workforce. Together with the garment sector, the Vietnamese footwear products are playing a more and more important role on the world stage. The Vietnam Industry and Trade Information Centre of the Ministry of Industry and Trade cited data from the World Footwear Yearbook, showing that Vietnam ranked second in the world in footwear exports, reaching 1.23 billion pairs in 2020. With this result, for the first time Vietnam surpassed 10% of the world total footwear exports by reaching 10.2 percent, and increasing by 4.4 times compared to 2011 when it was just 2.3 percent, with 316 million pairs of shoes being exported. Vietnam has become the world's largest exporter of canvas shoes in terms of value, outstripping even China. This is the first time that China has not led the export of a particular type of footwear. Several world famous footwear brands like Nike, Adidas, Reebok and Puma have had large quantities of their products made in Vietnam. The prospect of the Vietnamese footwear industry is very likely to go even further, since China continues to reduce incentives for investments in footwear in order to focus on high-tech technology, making international footwear orders move from China to Vietnam. Commitment of Vietnamese companies Despite the advantage of lower labor costs at a reasonable level, businesses are also making great efforts to invest more in technology to meet the increasingly strict requirements of buying partners. Mr. Vu Duc Giang, Chairman of the Vietnam Textile and Apparel Association, explained why Nike has not moved any orders previously placed at Viettien Garment Corporation, because as of October when we reopened, Nike had not yet found another manufacturer capable of meeting its requirements in terms of time, quality and quality control like the ones in Vietnam. He also pointed out that only when the pressure of delivery time is too high, making it impossible to balance the delivery and sales time, do famous brands move their orders to manufacturers in countries that can satisfy these requirements. However, a number of seasonal orders have been moved out of Vietnam to ensure the year end shopping season deliveries to major markets. Mr. Vu Duc Giang said that during the social distancing period, Vietnamese textile and garment companies could not meet the delivery schedule, so a certain number of orders for delivery in November and December were moved away, about an estimated 13 percent to 14 percent. Yet now there are signs of orders coming back. Similarly, the footwear industry also saw a small number of seasonal orders moved out of Vietnam. The commitment and reputation of Vietnamese companies could also be one of the most important factors for foreign partners to feel secure for long term cooperation. The fourth wave of the Covid-19 pandemic that lasted from June until September in Vietnam obviously proved this point. As soon as businesses reopened in early October, factories immediately let workers work overtime, and some even arranged for products to be delivered by air at a cost several times higher than by sea, in order to have their products delivered as per the schedule, especially for the holiday season and coming new year. In the long term, Vietnam's participation in many major Free Trade Agreements (FTAs) such as CPTPP or EVFTA will also be the reason why globally famous brands will prioritize Vietnam as a vital production base, because they can enjoy the tax incentives under these FTAs when products are exported from Vietnam. Buying partners also give priority to Vietnamese suppliers because of assurance of on time delivery, despite the many disruptions to the supply chain because of the ongoing Covid-19 pandemic.

Source: SGGP News

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World economy to cross $100tn for the first time in 2022 amid continued recovery

China is set to surpass the US to become the world's biggest economy by 2030, CEBR report says The world economic output is set to exceed the $100 trillion mark for the first time in 2021, two years before the previous forecast, the Centre for Economics and Business Research has said. The continued economic recovery from the pandemic will drive global economic growth, but the emergence of the Omicron coronavirus variant is a reminder that the pandemic is still a threat, even in highly-vaccinated societies, the London-based research institute said in its World Economic League Table report. “A year ago, we hoped that the economic effects of the pandemic would wear off relatively quickly. And in one sense they have,” said the CEBR. “We now expect world GDP [gross domestic product] in dollars in 2022 to be higher than we did pre-pandemic and to reach over $100tn for the first time.” The pace of the recovery is much stronger and there is “substantially more momentum” going into 2022 than the think tank had previously envisaged. The global economy, which tipped into its deepest recession last year, has bounced back strongly from the pandemic-driven slowdown. The International Monetary Fund expects the world output to expand by 5.9 per cent this year and 4.2 per cent in 2022. CEBR, however, expects global economic growth of 4.2 per cent next year, up from 3.4 per cent it predicted a year ago. However, the emergence of more virulent Omicron variant of Covid-19 and subsequent pandemic-related restrictions in parts of Europe and elsewhere have raised questions about the pace of economic momentum going forward. Inflation is another key issue for the global economy going forward. This year has been one of supply constraints and rising inflation, with shortages of commodities, finished goods, shipping space and fossil fuels feeding into inflation in the second half of 2021. While some of these inflation sources cooled in the last weeks of the year, there are signs that wage inflation is accelerating around the world. “The key question is whether inflation will largely subside of its own accord, with a modest degree of policy tightening and possibly a medium-sized fall in asset prices (of about 10 per cent to 15 per cent) but little impact on GDP, or whether bringing it down it will require something close to austerity,” CEBR said. The consultancy expects the push for greener economy and renewable and cleaner energy capacity boost to shrink consumer spending by about $2tn a year on average through 2036, as companies pass on the cost of decarbonising investments to consumers. “It is probably prudent to conclude that the drive for net zero will at least initially add to consumers’ costs,” the CEBR said. “If we assume that roughly half of the total cost of decarbonising investment is passed on to consumers, this would suggest that real consumer expenditure will be reduced by about $2tn per annum on average over the next 20 years.” The International Energy Agency estimates that global energy currently stands at about $2tn per year, about 2.5 per cent of global GDP. Under a scenario in which the energy sector achieves net zero emissions, investments need to rise to $5tn, or 4.5 per cent of global GDP, by 2030 and stay there until at least 2050, CEBR said citing IEA data. In its latest global economy ranking, CEBR predicted that China will overtake the US in 2030 to become the world’s biggest economy in dollar terms, two years later than the forecast in last year's rankings. It expects China's economy to grow 5.7 per cent annually from 2020 to 2025, then by 4.7 per cent per year between 2025 and 2030 and 3.8 per cent annually in the 2030-2035 period. “These are very similar rates to those in our forecasts last year. But faster growth in the US means that China is now forecast to overtake the US and become the world’s largest economy in 2030 rather than 2028 as we had forecast last year,” the report said. “This is still three years earlier than our pre-pandemic prediction.” India, which is expected to overtake France next year to occupy sixth position, will become the third-largest economy in 2031. Germany will stay pegged to the fourth spot next year but will lose a place to Japan in 2031 to become the fifth-biggest economy in the world. It will regain the lost place by 2036 to push Japan into fifth place. Russia is set to become the 10th largest economy by 2036, after Brazil and Indonesia in ninth and eighth spots, respectively, according to the CEBR. Saudi Arabia will be in the 17th spot, while the UAE will be the world’s 33rd largest economy, a place behind Israel and two places ahead of Iran in 2036, as per the index.

Source:The National News

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Pakistan: Textile, apparel industry: Govt decides to substitute power, RLNG tariffs

The Federal Government has decided to substitute electricity and RLNG tariffs for the textile and apparel industry, indicated for fiscal year 2021-22, with regionally competitive energy rates, well informed sources told Business Recorder. The Ministry of Commerce informed the Economic Coordination Committee (ECC) of the Cabinet last week that a summary of October 11, 2021 regarding Textile and Apparel Policy 2020-25 was submitted to the ECC. According to sources, a committee was constituted by the ECC, which held several meetings and recommended few changes which have been incorporated in the policy. Accordingly, the report of the committee and the comparison in tabular form of the specific changes incorporated in the draft policy were presented to the forum in compliance with the ECC decision, and salient features of the policy were shared with the Committee. The ECC was informed that the Technical Advisory Sub-Committee of the ECC, headed by the Advisor to Prime Minister on Finance and Revenue, Shaukat Tarin, deliberated upon the revised policy in its meeting held on December 16, 2021. The draft of the policy was submitted by the Ministry of Commerce on December 13, 2021 for approval by the ECC with the amendments as suggested by the Power Division. The ECC discussed the revised draft of Textile and Apparel Policy 2020-25 briefly as it was already cleared by the Technical Advisory Sub-Committee and approved it with the following amendments: (i) electricity and RLNG rates, indicated for fiscal year 2021-22, will be substituted, with regionally competitive energy rates ;(ii) the regionally competitive RLNG rates will be applicable on processing industry;(iii) for the captive and the cogeneration units, a separate policy will the formulated by the Ministry of Energy, in consultation with the Ministry of Commerce, which will cover the benefits and ;(iv) comments of the Finance Division shall be made part of the proposed Textile and Apparel Policy 2020-25. Meanwhile, Prime Minister Office has also sought comments from the Power Division and Petroleum Division on suspension of gas supply to export sector in Punjab. All Pakistan Textile Mill Association (APTMA), in its letter to Prime Minister Imran Khan, said that the Ministry of Energy had assured the Punjab export sector of continued gas supply provided they agreed to increase the price to $ 9 per MMBTU from $ 6.5. APTMA agreed to this in the presence of Abdul Razak Dawood. Subsequently, the Ministry of Petroleum presented a Gas Management Plan to the CCoE on December 2, 2021 which stated that gas to Captive Power Plants (CPPs), whether cogen or not, would be load shed starting December 15. According to APTMA, the Punjab-based industry was thereof hit with a double whammy, i.e., increase in gas price at $ 9 double that of Sindh & KP, and load shedding from December 15, 2021. APTMA, in its letter contended that under these circumstances, some member mills went to court on December 8, 2021 against CCoE decision for supply of entire six days and got stay citing discrimination against Punjab verses other provinces. “The discrimination is not only in price but also in gas load shedding which is restricted to Punjab only despite the fact that 70% of the textile industry is based in Punjab, and the suspension of gas will bring 80% of the industry to a complete halt which will have an extremely negative impact on exports and will bring to an end the extremely positive increase in exports and investment witnessed during the last year,” said Executive Director, Shahid Sattar, Executive Director APTMA in his letter to the Prime Minister. The Association further argued that if export industry was unable to deliver goods as per commitment with the buyers, orders once lost will be a permanent loss to Pakistan, and extremely difficult if not impossible to reverse. The bulk of Punjab-based mills are co-generation and use gas to produce electricity as well as steam and hot water used in the manufacturing process. Even if the additional electricity load could be accommodated the mills cannot generate steam & hot water from electricity. However, the truth of the matter is that the Discos are not in a position to supply additional power to the mills in any case. Prime Minister has been informed that as most of the mills (80 per cent) will not be in a position to operate, the impact on employment would be extremely detrimental. As a consequence, a large number of workers would be laid off in Punjab leading to many social and political consequencesPTMA requested Prime Minister to intervene to put on hold the decision of suspending gas supply to Punjab. It also sought time from Prime Minister to plead the Punjab industry case. According to sources, a ministerial committee comprising Advisor on Finance and Revenue, Energy Minister, Hammad Azhar, Minister for Industries and Production, Khusro Bakhtiar and Advisor on Commerce and Investment, Abdul Razak Dawood held a meeting consecutively for two days this week past on the issue of gas supply to the textile sector. The sources maintained that after the delivery of hard-hitting arguments between the committee members on this issue, it has been decided to give 30 MMCFD RLNG to most efficient Punjab based textile mills only for processing purposes.

Source: Aaj TV

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U.S. must revoke all sanctions on Xinjiang textiles: commerce chamber

The China Chamber of Commerce for Import and Export of Textiles on Saturday urged the United States to revoke all its sanctions and suppressions on Xinjiang-made textiles. The U.S. side has recently signed the so-called "Uyghur Forced Labor Prevention Act" into law, which bans imports of textile-related products from China's Xinjiang Uygur Autonomous Region. The move completely violated market principles and the rules of the World Trade Organization, disrupted international trade order, and severely damaged the interests of textile and apparel manufacturers and consumers in China and the United States, the chamber said in a statement. The U.S. accusation of so-called "forced labor" issue is purely fabricated out of thin air and has no factual basis, the statement said. It stressed that China's textile and apparel industry has been committed to safeguarding workers' rights and interests, and has provided stable and efficient supply chain services for the global market. For the common interests of both sides, the chamber is willing to strengthen communication with related organizations and sectors from the United States, and strive to maintain the stability of bilateral economic and trade relations in the textile and apparel industry, according to the statement. Meanwhile, the chamber said it hoped that global textile and apparel firms and consumers, including those in the United States, can see through the U.S. long-lasting attempts at smearing China's image and curbing China's development in the name of "human rights," and make their own judgement based on facts and truth.

Source: Xinhua Net

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How China and the United States might find a way to collaborate around strategic competition

Heightened US–China tensions and strategic competition and China’s recent weaponisation of trade against countries like Canada and Australia have encouraged calls to drastically divert economic ties away from China. Some switching of trade is inevitable because lower trust and increased uncertainties increase the risk-adjusted costs of doing business. Breaking economic ties may isolate China but it will also make the world significantly poorer. An economic retreat from China would mean a retreat from Asia because of the complex interdependence of Asian trade, investment and financial flows. This would be flawed both as an economic and a security strategy, undercutting the region’s economic strength, as well as the security networks beyond US alliance relationships that are the foundation of East and Southeast Asian security. A retreat from the Chinese economy means a retreat from complex regional supply chains that would cause severe economic and political damage to Asia and the global economy. Over 20 per cent of value added in Chinese exports is produced in other mainly neighbouring countries, 39 per cent of the total from foreign-invested firms. More than 90 per cent of China’s trade derives from private or foreign-invested firms. The first-round cost of a general regional decoupling from a China-interlinked Asian economy would be very large: an immediate drop of over 11 per cent in ASEAN incomes, for example. Japan (China’s largest foreign investment partner), South Korea and other countries’ investment and trade in Asia would be undermined. The interest in terms of regional prosperity and stability in avoiding this outcome cannot be overstated. Not only would such a retreat damage all Asian economies; a collapse in regional trade would increase political vulnerability across the region. Even US Commerce Secretary Gina Raimondo and US Trade Representative Katherine Tai have both called for re-coupling with China: China they say is simply too big a part of the world economy from which to disengage. And American trade with China is growing, as is American investment into China. That said, it’s not at all yet clear how or where the Biden administration’s global China strategy will finally settle. Strategic competition with China is a battle cry in Washington around which partisans of every hue have now begun to rally. And China is of a mood to join the fray, wherever it may lead and however uncertain its outcomes may be. Indeed, finding a way to collaborate on reinvigorating the order that constrains strategic competition to productive outcomes increasingly appears a task that might be beyond the grasp of two great nations, left to their own devices. In our lead article this week, Dong Wang argues that ‘different visions of [the] regional order need to be harmonised and a more inclusive vision [of that order] needs to be developed and articulated’. Drastically contrasting visions for the future of the regional order were on display last September. On the same day that month that the leaders of Australia, the United Kingdom and the United States announced the AUKUS defence deal, China formally lodged its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Wang argues that the ‘future regional order has to be one of inclusion and integration, rather than one of exclusion and bloc-rivalry’. China’s CPTPP application should be considered in that light and is an opportunity to reinvigorate the regional and global trading system that should not be passed up, he suggests. Compliance with the CPTPP deepens commitment to open markets and shared rules in the regional trading system and substantially raises trade standards among its participants. The trade pact spans 30 chapters with provisions across labour and environmental standards, government procurement, competition, state-owned enterprises (SOEs) and designated monopolies, intellectual property and investment. Principles and rules around digital trade in the region, including provisions related to personal data privacy and the cross-border transfer of data, are entrenched within the trade pact’s e-commerce chapter. Chinese policymakers will have their work cut out enacting the reforms to meet the standards set out in the CPTPP, but China’s taking up that challenge should be welcomed not only by CPTPP members but by the global trade community. Chinese provincial governments might be reluctant to move on SOE and competition reform that might dramatically shake up employment in their jurisdictions and exact large short-term political costs. Carve outs given to Vietnam and Malaysia in the CPTPP around disciplines on SOEs and designated monopolies are unlikely to be granted to China: the scale of the problem with state support for Chinese SOEs is of an entirely different order. Chinese regulators in the digital arena will also need to be prepared to accommodate CPTPP rules on digital privacy and the cross-border transfer of data as they figure out the regime for data governance at home. By engaging with China on these issues, governments in the region can help push forward Chinese economic reform. As Wang notes, China’s CPTPP application is intended in part to provide the impetus ‘to lock in momentum toward the implementation of domestic structural reforms’ by generating ‘external reform pressure’. Much of China’s to do list of economic reforms have been ticked off by developed country CPTPP members who have lessons to share with China. Working with China on the tasks of economic reform will be critical to driving and realising the positive spillover effects of future Chinese growth on regional growth, on which the region’s prosperity significantly depends. Wang acknowledges that the ‘politicisation, weaponisation and over-securitisation of trade issues is corrosive’ to regional prosperity. The negotiation of China’s accession to CPTPP is unlikely to progress without settlement in detail and in principle of the issues of Chinese trade coercion that have affected trade with Australia, Canada and Japan, all founding members of CPTPP. US disdain for multilateral institutions such as the World Trade Organization that began under former president Donald Trump’s administration has put the rules-based trading system under duress. The negotiation of entry to CPTPP is a golden opportunity for China to set a new course that builds trust in its commitment to the multilateral rules-based system and therefore has strategic significance well beyond the negotiation of a relatively modest regional trade agreement. China’s interest in joining the CPTPP ought also to encourage the United States to resume the economic engagement in Asia that it continues to walk away from. As Wang suggests, this ‘would require both Washington and Beijing to abandon [their] zero-sum mentality and instead conceive of power as a positive-sum game’. If China approaches the negotiation in the spirit it will need to succeed, it’s a strategy that could prove an effective first step in rapprochement with the United States, delivering the countries of East Asia and the Pacific and the global economy the bonus of a much more secure international trading system as well as a boost to regional trade. The EAF Editorial Board is located in the Crawford School of Public Policy, College of Asia and the Pacific, The Australian National University.

Source: East Asia Forum

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