The Synthetic & Rayon Textiles Export Promotion Council

MARKET WATCH 28 AUGUST, 2020

NATIONAL

INTERNATIONAL

GST Council meet: States accuse Centre of 'arm-twisting' them to borrow

Following a five-hour-long GST Council meeting on Thursday, states accused the Centre of ‘arm-twisting’ them to borrow, terming it a ‘betrayal of federalism’. Despite being given seven days to examine the two options offered by the Centre, they turned those down minutes after the meeting concluded. Most states pressed for borrowing by the Centre to compensate them for the shortfall in collections. During the meeting, the Centre gave the states the option to either borrow Rs 97,000 crore (shortfall according to the formula given under the law), or the entire Rs 2.35 trillion that accounts for the excess shortage in view of the Covid disruption.T S Singh Deo, finance minister of Chhattisgarh, said states were being arm-twisted to get the compensation, which was Constitutionally guaranteed to them. He questioned why the Centre wasn’t taking the loan, given there would be no repayment burden on states and the entire principle plus interest would be repaid through cess collection anyway. “They are saying the entire principle and interest will be repaid using cess, which will continue after the five-year timeline. They agreed to raise our FRBM (fiscal responsibility and budget management) limit. If there is no financial burden, why can’t the Centre take the loan itself, instead of asking states and UTs to take it separately?” said Deo. Manish Sisodia, FM of Delhi, called the offer a ‘betrayal of federalism’. He said the option to avail of a loan from the RBI will not work for Delhi because it does not have the right to take a loan, as it is not a full state.  “The Centre is shirking responsibility. In case of Delhi, as it is not a full state, it therefore doesn’t have the right to take a loan,” said Sisodia, adding that the Delhi government was facing a 57 per cent shortfall compared to the Budget target. “The Centre should take the loan and give it to Delhi, as we have to give salaries to doctors, engineers, and teachers,” he said. Delhi faced a Rs 7,000-crore revenue shortfall for the first quarter, which is expected to widen to Rs 21,000 crore by the end of the year. “They took away out taxing rights and are now asking us to take a loan from the RBI. It is the biggest betrayal in the name of federalism,” he said. Puducherry concurred with Delhi. “There is going to be a big problem for us. We are a union territory, so when we go for market borrowing and get permission from the RBI, it has to go through the home ministry; it is not possible for us to borrow directly,” said Chief Minister V Narayanaswamy. The cess should not only be for 5 years, but increased to 10, said Puducherry. Badal said all states were in financial crisis and “we have to get money and save our people”. Punjab FM Manpreet Singh Badal said the solution of requiring states to borrow was being “thrust on us”. “They want to thrust the option of borrowing on us. The meeting went on for 5 hours, but it was not a happy atmosphere. Trust deficit was clearly visible. The AG’s views were read out but not circulated. We are answerable to our legislatures and Cabinet,” said Badal. He added that the dispute resolution mechanism provided under Section 279 of the Constitution should be activated, for states have a legal recourse if there is something they did not agree with. Badal added that the Centre should pay a third of the deficit from the consolidated fund of India, and the remaining two-thirds may be borrowed in the sixth or seventh year. He further pointed out that the Rs 54,000 crore of the remaining integrated GST money, which was wrongly deposited to the consolidated fund of India, should be credited back to the IGST so that compensation may be paid. “The government has played with the country’s economy. Almost every state is seeking compensation. It was projected that the revenues would grow as leakages come down, and the GDP increases, a proposition that seemed realistic,” added Badal. In fact, even BJP-ruled states such as Karnataka recommended that the Central government borrow to compensate the states. Bihar, too, gave two options, the first being that the Central government borrow and give it to the states, and the second being that the states be allowed to borrow with certain conditions such as low interest rates, an increased FRBM limit, along with the condition that the Central government facilitate the borrowing. Some states even read out the minutes of the GST Council’s 6th, 7th and 8th meeting, and picked up recorded minutes of the previous FM and previous revenue secretary to remind the Centre of its obligation. Sisodia highlighted that ever since the GST implementation, neither had inflation reduced nor had revenues increased for states, as was earlier projected. Further, 70 per cent of states’ taxation rights had been subsumed. When all states are suffering from a revenue shortfall, the Centre is going back on its promise of fully compensating states for the deficit. Jayanta Roy, group head (corporate sector ratings), ICRA, said that with the aggregate protected revenues of states — estimated by the rating agency at Rs 7.65 trillion for FY21 — the GST compensation requirement appears set to more than double to Rs 3.64 trillion for the current fiscal year, from the Rs 1.65 trillion in FY20.

Source: Business Standard

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Centre gives states two options to meet GST compensation cess shortfall

The Centre on Thursday offered two options to states to compensate them amid inadequate cess collections under the goods and services tax (GST) regime. One was an offer of a special window to states, in consultation with the Reserve Bank of India (RBI), to the tune of Rs 95,000 crore at a reasonable interest rate. The other was for states to borrow Rs 2.35 trillion from the market, with the RBI as a facilitator. However, the burden of repayment will not be on states. The timeline for cess imposed on sin and luxury goods will be extended beyond June 30, 2022 (up to which states are constitutionally guaranteed compensation), to help service the debt. Finance Minister Nirmala Sitharaman told the media that the Centre would facilitate the borrowing, by talking to the RBI. This is to ensure individual states do not rush to the market and raise bond yields. According to government estimates, Rs 97,000 crore is the shortfall in compensation, as given in a formula under the law, with Rs 2.35 trillion the overall deficit factoring in the Covid situation. Finance Secretary A B Pandey said collections from the compensation cess were estimated at Rs 65,000 crore for FY21. While the target for compensation under the law is Rs 1.62 trillion, accounting for the impact of Covid-19, the requirement stands at Rs 3 trillion, he added. The Centre will provide details to states in a couple of days, and they will return to the next proposed Council meeting with their choice, said Sitharaman. The borrowing mechanism will be there for FY21, after which it will be reviewed in April 2021, said Pandey. States are guaranteed full compensation for the first five years of the GST regime in case they fail to record 14 per cent growth in revenues from GST on the base year of FY16. They are yet to get a rupee of compensation in FY21 against the requirement of Rs 1.5 trillion for the first four months, said Pandey. Asked about the issue of raising cess or expanding the same, Sitharaman said the matter was not discussed in the meeting. As to what the incentive is for states to go for just Rs 97,000 crore and not the entire Rs 2.35 trillion, the FM said it was up to them because some may not like to borrow the amount of shortfall caused by ‘act of God’ Covid-19.Further, she disclosed that states would be given additional unconditional leeway of 0.5 percentage points of the GDP, as any additional borrowing will lead to fiscal deficit concerns. States have already been given an unconditional 0.5 percentage point leeway over and above the 3 per cent under the Atmanirbhar Bharat package. Overall, they have been given a two-percentage-point flexibility, though the remaining 1.5 percentage points are based on riders like initiating power sector reforms, and taking steps towards ‘one nation one ration card’. The GST Council meeting was called to discuss the single-point agenda of compensating states. The Centre also took the opinion of Attorney General K K Venugopal, who advised against taking recourse to the consolidated fund of India for compensating states. Governments — both the Centre and states — collected Rs 21,747 crore from the compensation cess in the first four months of FY21, which was two-thirds of the Rs 32,796 crore mopped up in the corresponding period of FY20. In fact, collections were muted in the last financial year too. The collection was Rs 95,000 crore but states were given Rs 1.65 trillion after dipping into excess collections from cess of previous years.

Source: Business Standard

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Government interested in businesses not people, says SC, as Centre stays mum on moratorium

The court has given the government — which said it backs the RBI’s stand — until the next hearing on September 1 to clarify its own view on the matter. The top court will also hear other petitions seeking an extension of the moratorium beyond August 31. The Supreme Court said the government hadn’t addressed the “plight of the people due to the lockdown” and was only “interested in business” as it had failed to take a stand on waiving interest during the six-month loan moratorium that’s to end on August 31. The Reserve Bank of India (RBI) had announced the halt on repayments to support borrowers hit by the Covid-19 pandemic and the lockdown that followed but has said that interest won’t be waived. The Supreme Court is hearing a plea seeking the waiver of interest during the moratorium period. The court has given the government — which said it backs the RBI’s stand — until the next hearing on September 1 to clarify its own view on the matter. The top court will also hear other petitions seeking an extension of the moratorium beyond August 31. The court has asked the government to respond to these petitions by September 1 as well.

 Government has ample powers

 “The problem has been created by your lockdown. You cannot be interested only in business and not in sufferings of the people,” said the three-judge bench led by justice Ashok Bhushan on Wednesday. The court observed that the government had ample powers under the Disaster Management Act to stop banks from charging interest on deferred equated monthly installments (EMIs) as well as interest on interest accrued during the moratorium period. The bench had said earlier that charging interest on loans during the moratorium period would defeat the purpose of the relief but had granted time to the government to review the issue. The bench, which included justices R Subhash Reddy and MR Shah, said the government was “hiding” behind the RBI and asked why it didn’t want to take a stand. It expressed concern over the delay and adjourned the case to September 1 to give the government a chance to take a view on the matter. Solicitor general Tushar Mehta protested against the remarks of the bench, insisting that the government and the RBI were “working in cooperation” and it would be “unfair” to say that the government was “hiding” behind the RBI. The government has backed the RBI’s argument that a blanket waiver across sectors will affect the financial stability of the banking system and has declined to take a separate stand despite repeated court reminders. The bench had sought the views of the RBI and the government on the petition led by Gajendra Sharma, who said he was a borrower whose business and income had been hit by the pandemic. The RBI has led an aidavit to the eect that the moratorium was only a loan “deferral” and did not include any “waiver”. Such a cancellation of interest can only be sector specific and ought to be extended to those industries that have been especially hit, the RBI said. A blanket waiver would make commercial banks unviable, it said. The bench had also sought the views of the Finance ministry, which hasn’t led an affidavit thus far. Mehta told the court that the government’s view was the same as that of the banking regulator.

Source:   Economic Times

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FM Sitharaman calls coronavirus ‘Act of God’; says, economy will contract this fiscal year

Finance Minister Nirmala Sitharaman on Thursday said the economy has been hit by the COVID-19 pandemic, which is an ‘Act of God’, and it will see a contraction in the current fiscal.  As per the Centre’s calculations, states will be facing a shortfall of Rs 2.35 lakh crore in GST revenues in 2020-21.  In the current fiscal, the compensation requirement of states has been estimated at Rs 3 lakh crore, of which Rs 65,000 crore would be funded from the revenues garnered by levy of cess. This leaves a shortfall of Rs 2.35 lakh crore. The Centre has estimated that of this Rs 2.35 lakh crore, Rs 97,000 crore compensation requirement is due to GST rollout and the remaining is on account of the impact of COVID-19 on the economy. “This year we are facing an extraordinary situation that even below 10 per cent approximate estimation you are facing an ‘Act of God’ which might even result in a contraction of the economy,” Sitharaman said.  Earlier this week, the Reserve Bank had said that the contraction in economic activity was likely to continue in the second quarter of the current fiscal as upticks witnessed in May and June appears to have lost strength following reimposition of lockdowns to contain the coronavirus pandemic. The government imposed a nationwide lockdown on March 25 to combat the pandemic. The lockdown was partially lifted and then reimposed by certain states to check the spread of the coronavirus infections. The National Statistical Office is scheduled to release its estimates of GDP for the first quarter of this fiscal on August 31. The growth projections for current fiscal by various agencies show a sharp contraction of the Indian economy ranging from (-)3.2 per cent to (-)9.5 per cent. India’s GDP growth has been slowing even before the outbreak of the pandemic. India’s Gross Domestic Product (GDP) growth of 4.2 per cent in 2019-20 was the lowest since the global financial crisis more than a decade ago.

Source: Financial Express

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Piyush Goyal launches national GIS-enabled land bank system

Commerce and Industry Minister Piyush Goyal on Thursday launched the national GIS-enabled land bank system, which will help investors to get real-time information about the availability of industrial land and resources. Launching the system, Goyal expressed confidence that other states/UTs will be onboarded by December 2020, as the project has been launched for six states. The system is being developed by integrating the Industrial Information System (IIS) with state GIS (Geographic Information System). This is a prototype only and will be developed further with inputs from states to make it an effective and transparent mechanism for land identification as well as procurement. The IIS portal is a GIS-enabled database of industrial areas/clusters across the states. “More than 3,300 industrial parks across 31 states/UTs covering about 4,75,000 hectare land have been mapped on the system. The information available includes forest, drainage; raw material heat maps (agricultural, horticulture, mineral layers); multiple layers of connectivity,” the Commerce and Industry Ministry said in a statement. Goyal also held a virtual meeting with the industry ministers of states, UT administrators and senior officers.  In his address, the minister called upon the states to collectively work in the spirit of ‘Team India’ to enhance industrial activity in the country and attract investment. He also said that in countries where Indian companies face restrictive trade practises, the reciprocity clause may be invoked. The minister stressed on developing a single-window system, which could be a one-stop digital platform to obtain all requisite central and state clearances/approvals required to start business operations in India. “This could eliminate the need for investors to visit multiple platforms/ offices to gather information and obtain clearances from different stakeholders. It could leverage capabilities of existing systems and provide time-bound approvals and real-time status updates to investors,” he added. He said that even the local bodies should also be involved in this system, and a notion of deemed approval can be adopted to make the system effective. Further, he said the states should identify products with market potential for import substitution as well as export accentuation, and establish forward and backward market linkage channels. On Agri export policy, Goyal said so far only 14 states have finalised the action plans, and others should finalise it expeditiously. The minister also stressed on the need for the states to incentivise value addition activity in not only agriculture but also industrial products.

Source: Financial Express

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Delayed GST payment: Interest to apply prospectively, says CBIC

The GST law stated that an 18% interest is to be charged on delayed gross GST payment, which meant that the GST liability considered for interest calculation included the part which could be offset by input tax credit. The Central Board of Indirect Taxes and Customs (CBIC) clarified on Wednesday that while its notification on charging interest on delayed payment of GST on net liability is prospective in nature, the central and state tax administration would not implement it retrospectively. The GST law stated that an 18% interest is to be charged on delayed gross GST payment, which meant that the GST liability considered for interest calculation included the part which could be offset by input tax credit. However, this was changed by the GST Council in its 39th meeting so that interest was to be levied on net liability or the amount to be paid in cash. The CBIC in a statement said that due to technical reasons, the notification to give effect to the GST Council decision has been issued prospectively from September 1. “CBIC has assured that no recoveries shall be made for the past period as well by the central and state tax administration in accordance with the decision taken in the 39th Meeting of the GST Council,” it said. Earlier this year, the CBIC had urged its zonal heads to recover a whopping Rs 46,000 crore from taxpayers on account of penal interests arising from delayed payment of tax with GSTR-3B returns. The last date for filing GSTR-3B for any month is 20th of the subsequent month; an annual interest of 18% is payable on the gross tax amount for any   delay. However, this amount was calculated on gross liability and will become infructuous due to the notification.

Source: Financial Express

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GST deficit: States should not be asked to borrow, says Mitra

He proposed that the centre must pay compensation from different cesses that it collects, as it is not getting devolved to the states. “It appears that our worst fears have come true,” West Bengal finance minister Amit Mitra wrote to union finance minister Nirmala Sitharaman on the central government’s stance that it was not in a position to pay GST compensation to states due to dip in collections. The letter comes a day ahead of the crucial GST Council meeting to hammer out a solution for protecting states’ revenue when the designated fund for the purpose is all set to prove completely inadequate in the current fiscal. In his letter, the state finance minister said that under no circumstances, the states should not be asked to borrow from the market as it would increase their debt service liability and may end up squeezing the expenditure capacity of states. He proposed that the centre must pay compensation from different cesses that it collects, as it is not getting devolved to the states. “In case of the shortfall, it is the responsibility of the centre to garner resources for fully compensating states, as per the formula agreed upon with the states,” he added. Mitra said that the constitutional amendment to guarantee a 14% y-o-y revenue growth for states was brought about with full support and agreement of the centre. “It not only cast upon the centre a constitutional obligation but also a moral one as well, to safeguard the sensitive fiscal relationship that exists between the centre and the states and which is highly skewed in favour of the centre,” he said. He further said that those who are taking a strident position are either not aware of the spirit and intent of the constitutional amendment or are consciously turning a blind eye to renege the sovereign promise to the states. “The introduction of GST in a trudy federal country like ours has been rightly hailed world over as the most innovative example of cooperative federalism, based on mutual trust. Some dent in the trust has already been made due to delayed payment of GST compensation. Let us not do anything that will give a death blow to this unique collective effort,” Mitra said.

Source: Financial Express

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Faceless assessment of income tax may face these 10 major roadblocks ahead

“True liberty flourishes when Governments are transparent”. India has always been criticized for bureaucratic opacity and ambiguous fiscal regulations which leaves too much room for subjectivity and bias. However, as much as minimizing regulations is important, simplifying the enforcement process and making bureaucracy accountable is equally relevant if not more. India has been gradually moving up the ladder in the ease of doing business index from 134 in 2013 to 63 in 2020 thanks predominantly to a spate of e-governance initiatives including SPICe for company incorporation, electronic MOA and AOA, single platform for reporting under FEMA, Online IEC application for cross border trade, computerization of Government departments and several other state reforms. The case for faceless assessment is probably the single most prominent initiative, post-GST, which has the potential to completely change the perception of the tax enforcement machinery in the country, often perceived to be draconian. To begin with, the scheme envisages: A National e-Assessment Centre (NeAC) in New Delhi, headed by Principal Chief Commissioner of Income Tax would be set up acting as a single point of contact for assesses and assessment units. Eight Regional e-Assessment Centres (ReAC) would be set up at Delhi, Mumbai, Chennai, Kolkata, Ahmedabad, Pune, Bengaluru and Hyderabad. Each ReAC would comprise of assessment unit (AU), review unit, technical unit and verification unit.  NeAC would issue notices and allocates the case to any Assessment Unit in ReAC through an automated allocation system. Any request for additional documents/evidence, search and enquiry shall be made by AU only through the NeAC and not directly to the assessee. Replies are sent to AU, which shall prepare the draft assessment order to be sent to NeAC and ultimately to the assessee. NeAC shall send the draft order to a Review Unit. In case of any modification is proposed, the NeAC shall assign the case to another AU (other than the erstwhile AU), which shall consider the modifications and finalise the assessment order.

Opportunity of being heard shall be given to the assessee at each stage of assessment.

Apart from the obvious perks such as savings in time, cost and energy, 24×7 active infrastructure, going green and ensuring social distancing, the following advantages can be emphasised:

  • The scheme marks a shift from territorial jurisdiction to dynamic jurisdiction preventing nexus between participants.
  • Online transaction IDs and acknowledgment receipts are added evidence for substantiating submission.
  • The case for frivolous high-pitched assessments is significantly reduced owing to collective decision making.

However the scheme, as much as its hailed for its intent and form, is fraught with practical challenges which needs to be carefully considered, including:

Resistance to change: Immediately after our Hon’ble Prime Minister announced the reform (on 13th August, 2020), the Income Tax Employees Federation expressed its disappointment to CBDT on the faceless assessment stating that:

  • transfer of officers to fill newly-created posts at regional e-assessment centres was heaping extra work on colleagues left behind.
  • Those officers in new posts also lacked office accommodation, necessary infrastructure, seating arrangements, and computers.

The gesture sums up the resistance to change and bureaucratic impediments in implementation.

Ability to assess digitally: Competence of the officers to understand the technicalities of the business purely based on written submissions and documentary evidence without a personal hearing needs to evolve over time. At this juncture, it is noteworthy that even under the e- proceedings scheme, lot of notices and rectification applications were redirected to the AOs for finalisation.

Need for professional assistance: With the majority of small and mid-segment tax payers and their accountants being familiar in local languages, a fully electronic assessment process would be difficult to manage, thereby forcing them to seek professional assistance which could be expensive.

Restricted response: Limiting the size of response in replies to e proceedings, has been a cause for concern but the scheme shall not be effective without any restriction either. In many cases, moderating the response to fit within the constraints would lead to an incomplete explanation and consequent action on that basis.

Maintenance of digital records: As of now, many assesses, including those liable for tax audit scheme, in Tier II and III cities, still maintain manual books of accounts. CBDT should nudge assessees to maintain documents and books of accounts in digital platforms for ease of submission and access.

Cybersecurity concerns: E-assessment Rules provide for “the use of any telecommunications software which supports video telephony” for the purpose of personal hearing without a designated preference. Concerns over security arise unless the Board releases a standard operating procedure and notifies platforms for the purpose.

Additional time for completion of assessments: The scheme provides 15 days’ time for the asssessee to respond to the initial notice. Any further notice requiring additional information shall prescribe a time frame at the discretion of the officer. Further, in case of modification in draft assessment order, an additional layer of review by a new unit would consume time disproportionately. Hence, the time for completing an assessment may actually increase, given the additional loops in the transaction.

“Phase-less” roll-out: In order minimize the downside risk, a phased implementation, similar to the “Turant Customs” scheme, which is currently being implemented in stages (Chennai and Bangalore to begin) could have been adopted. Turant Customs would be rolled out on a PAN-India basis only by December 2020 and has similar features of the faceless assessment under income tax. Such an approach would have given us an opportunity to correct when small before scaling nationally.

Perspective of the Judiciary: Comments by the judiciary in this regard, have also not helped the cause. The Hon’ble Madras High Court in a recent order (Salem Sree Ramavilas Chit Company vs DCIT [2020]) stated that the faceless tax-assessment system “can lead to erroneous assessment, if officers are not able to understand the transactions and statement of accounts of an assessee without a personal hearing.

Impact on Post Assessment collections: Post assessment tax collection, which indicates the effectiveness of assessment procedure, has increased steadily in the past 4 – 5 years and is at an all-time high, thanks to the scientific approach towards selection of cases for assessment. The approach has been gaining ground steadily. Attempting a complete transformation through e assessment could strain collections in the short-medium term, which are already muted by more than 30%. Transparency in fiscal enforcement was the need of the hour and any action or inaction in this regard, would have led to criticism. Despite the challenges and shortcomings, we must give it to the Government of the day for attempting such a bold and transformative initiative, the first of its kind globally on this scale, which has the potential to completely change regulatory enforcement environment in this country. The scheme no-doubt has teething issues, but that’s true for any initiative and in time we shall certainly tide over, our track record with digitizing TDS, Tax audit, Transfer pricing etc are classic testimony to our ability to embrace change. We wish and hope that all stakeholders and participants accept the scheme and seamlessly cooperate and collaborate to make it a resounding success for the nation. Afterall “progress is impossible without change, and those who cannot change their minds cannot change anything”.

Source: Financial Express

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Lifting of curbs on export of masks, PPE coveralls hailed

Textile units here praised the Centre for removing the restrictions on export of medical coveralls and N95 masks. Monthly export quota of 50 lakh N95 masks and unrestricted export of PPEs will help earn several crores in forex, exporters said. According to a notification from the directorate general of foreign trade issued on Tuesday, “The export policy for 2/3 ply surgical masks and medical coveralls of all classes and categories has been amended from restricted to free and these coveralls are now freely exportable.’’ The notification also said that the export of N95 masks or its equivalent has been revised from ‘prohibited’ to ‘restricted’ allowing export of up to 50 lakh units per month. In the initial months of Covid lockdown, when the Indian units started manufacturing medical coveralls and masks, the Centre had banned their export as there was a huge demand for the medical textiles within the country. Since then, Indian companies increased their production capacity to the extent that the domestic demand was met and there was surplus production. Now the relaxation is expected to give a fillip to the units manufacturing medical textiles as they can export to other countries. “We have been demanding the relaxation of the export ban for a long time,” said Apparel Export Promotion Council chairman A Sakthivel. Thanking Union minister of commerce Piyush Goel for the decision, Sakthivel said that the move will help manufacturers, particularly in Tirupur, where the textile sector has managed to take baby steps towards medical textiles. “We have a lot of manufacturers making N95 masks in Tirupur,’’ he said. Exporters said that they have been receiving several inquiries from international buyers for the products but were unable to supply because of the restriction. “Now, we will be able to create additional markets for Tirupur across the world,” Sakthivel said.

Source: Times of India

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NITI Aayog releases report on Export Preparedness Index (EPI) 2020

NITI Aayog in partnership with the Institute of Competitiveness released the Export Preparedness Index (EPI) 2020 today. The first report to examine export preparedness and performance of Indian states, EPI intends to identify challenges and opportunities;   enhance the effectiveness of government policies; and encourage a facilitative regulatory framework. The structure of the EPI includes 4 pillars –Policy; Business Ecosystem; Export Ecosystem; Export Performance – and 11 sub-pillars –Export Promotion Policy; Institutional Framework; Business Environment; Infrastructure; Transport Connectivity; Access to Finance; Export Infrastructure; Trade Support; R&D Infrastructure; Export Diversification; and Growth Orientation. “The Indian economy holds immense potential to become a strong exporter on the world stage. To realize this potential, it is crucial that India turns to its states and union territories and makes them active participants in the country’s export efforts. In an attempt to realize this vision, the Export Preparedness Index 2020 evaluates states’ potentials and capacities. It is hoped that the detailed insights from this Index will guide all stakeholders towards strengthening the export ecosystem at both the national and subnational levels,” said NITI Aayog Vice Chairman Dr Rajiv Kumar. Amitabh Kant, Chief Executive Officer, NITI Aayog, said, “The Export Preparedness Index is a data-driven effort to identify the core areas crucial for export promotion at the sub-national level. All the states and union territories have been assessed on crucial parameters that are critical for any typical economic unit to achieve sustainable export growth. The Index would be a helpful guide for the state governments to benchmark regional performance with respect to export promotion and thus deliver key policy insights on how to improve and enhance the same.” What this edition of the EPI has shown is that most Indian states performed well on average across the sub-pillars of Exports Diversification, Transport Connectivity, and Infrastructure. The average score of Indian states in these three sub-pillars was above 50%. Also, given the low standard deviation in Export Diversification and Transport Connectivity, the averages are not skewed to the higher side by a few over-achievers. However, Indian states should also focus on other key components in order to improve export competitiveness. Overall, most of the Coastal States are the best performers. Gujarat, Maharashtra and Tamil Nadu occupy the top three ranks, respectively. Six of eight coastal states feature in the top ten rankings, indicating the presence of strong enabling and facilitating factors to promote exports. In the landlocked states, Rajasthan has performed the best, followed by Telangana and Haryana. Among the Himalayan states, Uttarakhand is the highest, followed by Tripura and Himachal Pradesh. Across the Union Territories, Delhi has performed the best, followed by Goa and Chandigarh. The report also highlights that export orientation and preparedness are not just restricted to prosperous states. Even emerging states can undertake dynamic export policy   measures, have functioning promotional councils, and synchronize with national logistical plans to grow their exports. Chhattisgarh and Jharkhand are two landlocked states that had initiated several measures to promote exports. Other states facing similar socio-economic challenges can look at the measures taken by Chhattisgarh and Jharkhand and try to implement them to grow their exports. Many northeastern states under the Growth Orientation sub-pillar were able to export more by focusing on their indigenous product baskets. This shows that a focused development of such baskets (like spices) can drive exports on one hand and also improve farmer incomes on the other in these states. Based on the findings of the report, export promotion in India faces three fundamental challenges: intra- and inter-regional disparities in export infrastructure; poor trade support and growth orientation among states; and poor R&D infrastructure to promote complex and unique exports. There is a need to emphasize on key strategies to address these challenges: a joint development of export infrastructure; strengthening industry-academia linkages; and creating state-level engagements for economic diplomacy. These strategies could be supported by revamped designs and standards for local products and by harnessing the innovating tendencies to provide new use cases for such products, with adequate support from the Centre. To achieve the target of making India a developed economy by focusing on ‘Atmanirbhar Bharat’, there is a need to increase exports from all the states and union territories. The EPI provides invaluable insights on how states can attain this goal. The final framework of the EPI was based on essential feedback from states, UTs and organizations like EXIM Bank, IIFT and DGCIS. The data has been primarily provided by state governments. For some of the indicators, RBI, DGCIS and Central ministries were consulted.

Framework The 4 pillars and the rationale behind selection of each of them are given below:

  1. Policy: A comprehensive trade policy provides a strategic direction for exports and imports.
  2. Business Ecosystem: An efficient business ecosystem can help states attract investments and create an enabling infrastructure for individuals to initiate startups.  
  3. Export Ecosystem: This pillar aims to assess the business environment, which is specific to exports. iv. Export Performance: This is the only output-based pillar and examines the reach of export footprints of States and Union Territories.

Source: PIB

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NIFT and IIP to help UP artisans design and package their products

Sidbi to meeting capital challenge of artisans. MSMEs manufacturing of special products under the one-district-one-product (ODOP) scheme would also be able to avail assistance The National Institute of Fashion Technology (NIFT) and Indian Institute of Packaging (IIP) will help artisans in Uttar Pradesh in improving the design and packaging of their products. Besides, Sidbi would be meeting the capital challenge of these artisans. Small & micro entrepreneurs engaged in the manufacture of special products under the onedistrict-one-product (ODOP) scheme of the Adityanath Government would be able to   avail assistance under this plan. According to state MSME minister Siddharth Nath Singh, the government will soon sign an MOU with Sidbi, NIFT and IIP to improve the packaging and design of the ODOP products. Sidbi will help entrepreneurs under ODOP meet the challenge of working capital. Singh said the agreement with NIFT and IIP would improve the design and packaging of ODOP products, besides promoting the Local-Vocal campaign. Speaking about the proposed MOU, the MSME minister said NIFT would provide better designs to the textile, leather and carpet industries besides conducting training workshops for artisans. He said NIFT would develop a design bank for ODOP products, through which entrepreneurs get raw material, fabrics and colours as per the demand of overseas market. NIFT will help in branding and promoting the ODOP products. The minister said IIP will also identify ODOP clusters in the state. He said that under the agreement with Sidbi, entrepreneurs will get equity infusions, rebate in interest on loans and other financial support. MSMEs will get a digital platform on which they can get loans approved in just 59 minutes. Sidbi will conduct a case-bycase study to promote exports of OPOP products.

Source:   Business Standard

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TN asks Centre to continue GST compensation citing increased fiscal burden

The Tamil Nadu government on Thursday urged the Centre to expedite release of Rs 12,258.94 crore, which is its Goods and Services Tax (GST) arrears from the latter since 2018-19 and the outstanding Integrated GST of Rs 4,073 crore for the 2017-2018 fiscal. Also, in view of COVID-19, which has imposed a fiscal burden on Tamil Nadu in terms of scaling up the medicare infrastructure for treatment and improving the health of the people, the Centre should continue with the GST compensation currently being enforced, the government said. This measure should continue so as to ensure the states do not suffer a setback on the fiscal front, D Jayakumar, Minister for Fisheries, Personnel and Administrative Reforms, who participated in the 41st meeting of the GST council on Thursday via video conference, demanded. The meeting was headed by Union Finance Minister Nirmala Sitharaman. At present, Tamil Nadu is cutting back on other expenditure to carry out COVID-19 preventive measures and is unable to give up the state's financial resources. "Tamil Nadu's fiscal burden has increased owing to the coronavirus pandemic and the crisis necessitated curtailment of other expenditures to cope with the present situation," Jayakumar said.Further release of the state's financial resources could have a serious impact on the implementation of welfare schemes for the poor and downtrodden, he stressed and demanded that the states continue to receive GST compensation. The Goods and Services (Compensation to States) Act, 2017 was enacted by the Central Government to compensate the loss of revenue to the states in order to implement the GST system. According to the law, the central government has paved the way for the states to be compensated for five years at a growth rate of 14 per cent with the financial year 2015-2016 as the base year. The Centre is currently levying a cess in order to compensate states, he pointed out. "The central government has the full responsibility to find other sources of revenue to augment the upper tax package in order to continue to provide compensation to the states." "If necessary, the Central government should come forward to ensure further legislation to extend the deadline for levying GST compensation surcharge to more than five years," Jayakumar said. In addition, the Centre must provide loans or advances to the GST surcharge fund to provide GST compensation to the states. This loan can be repaid, Jayakumar said and urged that the GST Council should make the above recommendation to the Central Government.

Source: Business Standard

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Global Textile Raw Material Price 28-08-2020

Item

Price

Unit

Fluctuation

Date

PSF

791.12

USD/Ton

0%

28-08-2020

VSF

1230.96

USD/Ton

0%

28-08-2020

ASF

1714.34

USD/Ton

0%

28-08-2020

Polyester    POY

740.32

USD/Ton

-0.58%

28-08-2020

Nylon    FDY

1930.63

USD/Ton

0%

28-08-2020

40D    Spandex

4064.48

USD/Ton

0%

28-08-2020

Nylon    POY

5225.76

USD/Ton

0%

28-08-2020

Acrylic    Top 3D

950.80

USD/Ton

-0.76%

28-08-2020

Polyester    FDY

1814.50

USD/Ton

0%

28-08-2020

Nylon    DTY

1887.08

USD/Ton

0%

28-08-2020

Viscose    Long Filament

929.02

USD/Ton

0%

28-08-2020

Polyester    DTY

2184.66

USD/Ton

0%

28-08-2020

30S    Spun Rayon Yarn

1712.89

USD/Ton

0.85%

28-08-2020

32S    Polyester Yarn

1357.25

USD/Ton

0%

28-08-2020

45S    T/C Yarn

2184.66

USD/Ton

0%

28-08-2020

40S    Rayon Yarn

1858.05

USD/Ton

0%

28-08-2020

T/R    Yarn 65/35 32S

1691.11

USD/Ton

0.43%

28-08-2020

45S    Polyester Yarn

1524.18

USD/Ton

0%

28-08-2020

T/C    Yarn 65/35 32S

2061.27

USD/Ton

0%

28-08-2020

10S    Denim Fabric

1.14

USD/Meter

0%

28-08-2020

32S    Twill Fabric

0.64

USD/Meter

0%

28-08-2020

40S    Combed Poplin

0.93

USD/Meter

0%

28-08-2020

30S    Rayon Fabric

0.47

USD/Meter

0%

28-08-2020

45S    T/C Fabric

0.66

USD/Meter

0%

28-08-2020

Source: Global Textiles

Note: The above prices are Chinese Price (1 CNY = 0.14516 USD dtd. 28/08/2020). The prices given above are as quoted from Global Textiles.com.  SRTEPC is not responsible for the correctness of the same.

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US, PRC agree to move ahead with phase I of trade deal

US and Chinese negotiators spoke on the phone recently about their phase one economic deal, the Chinese commerce ministry said. The two countries signed the accord in January, leading to a partial truce in their trade war. A US statement said the parties "addressed steps that China has taken to effectuate structural changes called for by the agreement.” Those changes “will ensure greater protection for intellectual property rights, remove impediments to American companies in the areas of financial services and agriculture, and eliminate forced technology transfer,” the office of the US Trade Representative (USTR) said in a statement. It added that both sides "see progress and are committed to taking the steps necessary to ensure the success of the agreement". According to the accord, China was to import an additional $200 billion in American products over two years, ranging from cars to machinery and oil to farm products. But the COVID-19 pandemic put pressure on the agreement and China's purchases of those goods has been lagging. In its statement, Beijing said a ‘constructive dialogue’ between the two sides had "agreed to create conditions and atmosphere to continue to push forward the implementation of the phase one of the China-US economic and trade agreement". The phase one deal called for officials to hold a ‘check-in’ every six months.

Source: Fibre2Fashion

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S.Korea's export volume falls for 4 months

South Korea's export volume kept falling for four straight months due to an economic fallout from the COVID-19 outbreak, central bank data showed Wednesday.   The export volume index lost 0.7 percent in July from a year earlier, continuing to slide for four months since April, according to the Bank of Korea (BOK). Export volume for machinery, transport equipment and textiles slumped in double digits, but the figure for computer, electronic and optical devices grew as people preferred working at home and attending online classes amid worry about the COVID-19 outbreak. In terms of value, the export shrank 8.6 percent in July from a year earlier, keeping a downward trend for the fifth consecutive month. It was down from double-digit falls of 23.3 percent in April, 25.2 percent in May and 10.5 percent in June each. Global demand partially recovered amid the reopening of businesses in major economies following shutdowns on the fear of the virus infections. The import volume index added 0.5 percent in July from a year ago, but the import value index retreated 11.1 percent in the month.

Source: Xinhua

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Indonesia: Textile industry not yet fully prepared to produce PPE: Chambers

Up until now, amid the spread of COVID-19, we are still not prepared to respond to the (demand) of PPEs, as we do not have the main materials Indonesian Chambers of Commerce and Industry’s Deputy Chairman for Trade, Benny Soetrisno, opined that Indonesia’s textile industry had yet to be fully prepared to produce personal protective equipment (PPE) for medical workers treating COVID-19 patients. Soetrisno believed that the domestic textile industry's focus remains increasingly unwavering on apparel products, while the potential for non-apparel textile products was not as populated. "For non-apparel textile products, it is still wide open. Up until now, amid the spread of COVID-19, we are still not prepared to respond to the (demand) of PPEs, as we do not have the main materials," he remarked during a virtual discussion event in Jakarta on Wednesday. The lack of materials to produce PPE results in the need to import, for which Soetrisno sought the involvement of all relevant parties to boost the industry, as it can lead to job creation and contribute to the country's foreign exchange. In order to advance the industry sector, Soetrisno called to optimize the three pillars of funding, power, and manpower deemed crucial to boost global competitiveness of the industry's products. "For instance, finance institutions and funding products remain the same. I entered the industry in 1982, and it has remained the same, with the need for new funding products," he stated.   Moreover, the price of power in the industry is still considerably high from that of other South East Asian countries, thereby making the retail price more expensive and hence reducing the products' competitiveness in the global market.

Source: Antara News

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Hit by Covid-19: Pakistan's export sector lacks credit, financing facilities to revive business

Exporters say financing schemes should be designed to cater to an urgent need of this sector Pakistan’s export sector has been badly hit by the Covid-19 outbreak and lacks credit and financing facilities needed to revive business and trade, said experts from the business and finance industry. Addressing an online dialogue on “Credit and finance issues faced by exporters amid Covid-19” on Tuesday, they shared that all financing schemes should be designed to cater to the urgent need of this sector. State Bank of Pakistan (SBP) Senior Joint Director Muhammad Arshad Khan informed dialogue participants that the central bank had increased financing for exporters. “Besides, the Long Term Financing Facility (LTFF) is no more limited to just traditional exporting sectors but is also open for potential exporters and new sectors of the economy.”   In view of Covid-19, he said, eligibility conditions for accessing the Export Finance Scheme (EFS) and the LTFF had also been relaxed. “Likewise, collateral-free support to small IT exporters in Pakistan is also being viewed by the SBP at present,” Khan added. Also present on the occasion, SBP Joint Director Muhammad Azam highlighted the other measures aimed at facilitating exporters. He said small and medium enterprise (SME) borrowers had already been allowed oneyear extension in the repayment of loans. Besides, the SBP, along with its field offices, continued to conduct capacity building and awareness sessions for the SMEs to inform them about how to access finance, he added. Azam suggested that all SME finance institutions should offer advisory services to small businesses and start-ups whereas banks should open dedicated hand-holding units for the SMEs. Pakistan Textile Exporters Association (PTEA) Secretary General Azizullah Goheer was of the view that commercial banks also needed to offer concessionary loans to exporters. He stressed the SBP’s local and field offices should interact more with local businesses. “Likewise, Covid-19-related financing should be provided in the quickest possible manner.” All Pakistan Textile Mills Association (Aptma) General Secretary for Punjab Chapter Kamran Arshad said more facilitation was needed to help exporters who supplied to the countries worst hit by the impact of Covid-19. He suggested that the SBP could establish its own insurance mechanism and earn revenue. Meanwhile, Sustainable Development Policy Institute (SDPI) Joint Executive Director Dr Vaqar Ahmed said recent evaluation of the SBP’s export financing schemes should lead to export diversification. “These schemes also need to be designed with a view to encouraging exporters to find markets in new countries.” He added that the central bank was currently incurring high internal costs for offering subsidised export credit that needed to be lowered by reconsidering the refinance rates which the SBP offered to commercial banks. He stressed the need for the SBP field offices to engage in regular public-private dialogue and to report back their findings to the head office so that policies were responsive to small exporters in second-tier cities and rural areas.  “The other area that should be carefully viewed is that luring foreign investment in Pakistan’s IT industry has been difficult due to the lack of export facilitation for this sector,” he added. Pakistan Banks Association official Fareed Vardag said small exporters still lacked knowledge about foreign trade requirements. “Export associations should have a help desk to guide about documentation requirements of the central bank and commercial banks.”

Source: The Tribune

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Near shoring: Europe’s next textile boom?

The European Commission is taking action to implement a long-stalled trade plan with countries in the Middle East and North Africa. European textile manufacturers look set for a significant boost if new, more flexible legislation is introduced to make it easier to work with nearshore partners. The winners will be textile businesses in the EU and pan-Euro-Med countries. The likely losers will be the UK post-Brexit and competitors in Asia. The European Commission is on track to push through new rules that could transform the cost advantages of nearshoring textiles production. The rollout will be subject to the approval of ministers from EU member states in the coming months. EU textiles firms could soon be able to make a fabric in Italy and send it to a Mediterranean neighbour such as Egypt or Lebanon for dyeing, while still avoiding the payment of trade duty on the finished product. The European Commission has this month recommended that the EU amends its trade agreements with 20 out of 24 of its fellow partners in the pan-Euro-Med (PEM) trade zone. The countries in the PEM zone include the EFTA states, the Balkan states and other countries in the Mediterranean region such as Algeria, Egypt, Israel, Lebanon, Morocco, Tunisia and Turkey. Manufacturers have been calling for some of the rule changes for the best part of a decade, but negotiations were stalled by the objections of the Tunisian and Moroccan governments. The European Commission has recommended that any countries that agree to the new rules should implement them, with the hope being that others will sign up in future. Representatives of British textile firms have expressed regret that the UK will not be benefitting from the agreements, which could incentivise European fashion firms to shift more of their production closer to home and out of Asian countries such as Bangladesh and China. Paul Tostevin, director of world research at Savills, says that its research suggests countries ranging from Ukraine and Serbia to Turkey could benefit from a nearshoring trend: “Policies that aid the flow of trade will further bolster their prospects as nearshoring destinations.” “The overall objective is to develop this Euro-Med region,” says Dirk Vantyghem, director general of Euratex, the umbrella body representing textile manufacturers in Europe. Vantyghem notes the urgency of the debate about moving production closer to the market since the Covid-19 pandemic started. The new rules, he says, “fit within that logic”. Ensuring that a textile product avoids duty is a complicated process. It must be demonstrated that the product has undergone enough of a transformation in the final step of the manufacturing process. Get that right — and, for example, linen spun in Lebanon can be turned into a shirt in Italy and be treated as if it were an Italian export in terms of trade duties. The new rules mean a greater number of production processes will now qualify textile products for preferential trade treatment. They will also allow for “full cumulating” for. most products, which means that the necessary amount of manufacturing can be split across more than two countries within the zone and still qualify, even if the initial product — such as cotton from India — comes from outside the zone. “Textiles are quite highly taxed,” says Ross Denton, senior counsel at Baker McKenzie, a multinational law firm. “The name of the game is to get as much as they can into the EU duty free.” A number of fashion firms, including Boohoo and Inditex, have benefited in recent years from moving manufacturing closer to where their products are sold. Denton is sceptical that the new rules will be enough to shift the needle for firms that already have highly optimised supply chains further afield, due to additional considerations such as labour costs and taxation. But he sees clear benefits: “They are making the PEM zone a much more attractive place to do integrated supply chains, specifically.” The UK is likely to be excluded from the new rules as the country looks to develop its own bilateral deals with trade partners now that it has exited the European Union. “We are continuing to raise the importance of this agreement, particularly as other new trade negotiations have not progressed. However, the UK government is currently pursuing its own rules of origin regime,” says Adam Mansell, CEO of the UK Fashion & Textile Association.

Source:  Vougue Business

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