The interest equalisation scheme for exporters, which allows access to bank credit at a subsidised rate, will be extended only for the MSME sector beyond June 30 for two months, per a government notification. “Claims of non-MSME exporters are not to be entertained beyond June 30, 2024,” a trade notice issued by the Directorate General of Foreign Trade on Friday stated. ₹750-cr outlay The two-month continuation of the scheme for the MSME sector comes with an outlay cap of ₹750 crore, the notice added. All other terms and conditions remain the same. Non-MSME exporters are disappointed with the discontinuation of the popular scheme for the 410 products that were earlier eligible for the benefit as they had hoped for its extension by 3-5 years. “This may affect exports of labour-intensive exports which have lost market share in past few years, as many merchant exporters are playing pivotal role in exporting such products and exports of such products from some large companies may also be impacted,” according to Ashwani Kumar, President, FIEO. First implemented in April 2015 for five years, the scheme got extended several times with the last extension set to lapse on June 30 2024. At present, the scheme provides a 2 per cent interest subvention or subsidy on loans taken by exporters from 410 identified sectors and a 3 per cent subvention to exporters of all products from the MSME sector. The government’s decision to not continue the scheme for non-MSME exporters was taken after the Finance Ministry asked the DGFT to conduct a study to find out its usefulness. The DGFT held consultations with exporters as well as banks and gave its report where it supported its continuation, officials tracking the matter said. In its submission to the government, exporters’ body FIEO had said that the interest equalisation scheme provided much needed competitiveness to Indian exports and should be continued for 3-5 years. It also made a case for higher subvention rates arguing that interest rate in India was much higher than the rates in competitor countries.
Source: The Hindu
India's goods and services exports are expected to cross $800 billion this fiscal despite global challenges, Commerce and Industry Minister Piyush Goyal said on Saturday. In 2023-24, the shipments stood at $778.2 billion (goods $437.1 billion and services $341 billion). He said that the global situation is serious as war is still ongoing between Ukraine-Russia and Israel-Hamas, and the Red sea crisis. The minister added that there are also elections in some of the major democracies like in Europe. "In such a situation it's a positive sign that our exports are growing (9 per cent growth in May) and …this also reflects that the world wants to do trade and investments with India. We are confident that this year we will have over $800 billion exports and it will be a historic record," Goyal told reporters here. He was here to participate in a programme of gems and jewellery exporters. Goyal added that for the $800 billion exports, the ministry is working on specifics with Indian missions abroad and export promotion councils. CITI-NEWS LETTER 13 13 He added that last year the current account deficit (CAD) has also reduced…our exports will increase; manufacturing will get a boost India recorded a current account surplus of USD 5.7 billion or 0.6 per cent of GDP in the March quarter. This is the first time in ten quarters that the crucial metric of the country's external strength has turned into surplus mode. In the year-ago period, the current account deficit stood at $1.3 billion or 0.2 per cent of GDP, and the same was $8.7 billion or 1 per cent of GDP in the preceding quarter ending December 2023. India's merchandise exports rose by 9.1 per cent to $38.13 billion in May even as the trade deficit widened to a seven-month high of $23.78 billion during the month, according to the latest government data. He added that focus on electric vehicles will help in reducing oil imports. The ministry is also holding a series of meetings with plantation boards, including spices, rubber, tobacco, tea and coffee, to promote exports especially those of value added goods. Further, he said that India has taken up on priority the issue of ban on imports of Russian-origin unpolished diamonds by the European Union (EU) and G7 nations to protect the interest of the domestic diamond polishing industry. "Our ministry and the gems and jewellery export promotion council are continuously in touch with the European Union and G7 nations," Goyal said, adding in the last meeting, India took up the matter strongly. "Still we are in touch with them to ensure that Indian industry does not have an impact," the minister said. CITI-NEWS LETTER 14 14 G7 countries — Canada, France, Germany, Italy, Japan, the UK, and the US — are major markets for Indian diamond exports.
Source: Money Control
The Federation of Indian Export Organisations (FIEO) has suggested the government to develop an Indian shipping line of global repute; extend the Interest Equalisation Scheme (IES), which is valid till June 30, for five more years; and provide a recurring budget of ₹500 crore (~$60 million) annually to the department of commerce to showcase Indian products and services on global platforms. The marketing support provided through the Market Access Initiative (MAI) of the department with a corpus of ₹200 crore (~$24 million) is ‘grossly inadequate’ to support the big target for exports, FIEO noted. The suggestions were offered by FIEO president Ashwani Kumar during a pre-budget consultation meeting with finance minister Nirmala Sitharaman, an FIEO release said. India’s outward remittance on transport services is increasing with rising exports. The country remitted over $109 billion as transport service charge in 2022, and this this is expected to touch $200 billion by 2030. A 25-per cent share by an Indian shipping line can save $50 billion on an annual basis basis and also reduce arm twisting by foreign shipping lines, FIEO said. The zero rating of exports should not be limited to budget constraints, it suggested. Looking at the rise in interest rates consequent to increase in repo rate from 4.4 per cent to 6.5 per cent in the last two years, the subvention rates may be restored back from 3 per cent to 5 per cent for micro, small and medium enterprises in the manufacturing sector from 2 per cent to 3 per cent for all in respect of 410 tariff lines, FIEO added.
Source: Fibre2fashion
Synopsis Activity in India's manufacturing sector rebounded last month with an increase in output driven by robust demand, leading to the fastest rate of hiring in over 19 years despite ongoing inflationary pressures, according to a survey. India's manufacturing activity witnessed a rebound owing to increased robust demand leading to the fastest rate of hiring in more than 19 years. This comes despite inationary pressures remaining elevated, a survey showed. The HSBC final India Manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, rose to 58.3 in June, slightly below the preliminary estimate of 58.5, but up from 57.5 in May. Strong demand is crucial for growth in Asia's third-largest economy, which is currently the fastest-growing major economy. Much of this growth is attributed to government infrastructure spending. "The Indian manufacturing sector ended the June quarter on stronger footing," stated Maitreyi Das, global economist at HSBC. "While the overall outlook for the manufacturing sector remains positive, the future output index receded to a three-month low, albeit it remains above the historical average." Upbeat demand lifted the output and new order sub-indexes in June, stretching the current sequence of expansion to three years. Growth in international demand eased in June, but stayed above the long run average. Bigger workloads generated more jobs. Hiring increased for a fourth consecutive month and at the sharpest rate since the survey began over 19 years ago. This was despite business sentiment falling to a three-month low, however, it remained strong and above the long-run average. An improvement in hiring would bring some respite to the ruling Bhartiya Janta Party, which has lost its parliamentary majority, and had to form its third-term government with the support of regional parties. Creating jobs would be the biggest challenge for the government over the next five years, reported Reuters, citing policy experts from one of its polls. Inflationary pressures remained elevated, the PMI survey showed. While cost prices increased at a marginally slower pace from May, prices charged to customers rose at the fastest pace in two years. "Manufacturers were able to pass on higher costs to customers, as demand remained robust, resulting in improved margin," added Das. However, inflation will average near the mid-point of the Reserve Bank of India's (RBI) target range of 2-6%, at 4.6% and 4.5% in the current and next fiscal years, the latest Reuters survey showed. The RBI was expected to lower its interest rate next quarter by 25 basis points to 6.25%, followed by another cut of the same size in the January-March quarter, the Reuters survey had showed.
Source: Economic Times
Synopsis "The main issue in SEZs is that we are not able to get economies of scale. The connect between SEZs and the domestic tariff area (DTA) or domestic market has to be improved. There are also issues if DTA is selling to SEZs," the official said. New Delhi: The commerce ministry has sought views of different departments on proposed measures to revive special economic zones and facilitate business transactions between SEZ and the domestic market, a senior official said on Monday. The official said that the ministry has suggested allowing the sale of products manufactured in Special Economic Zones (SEZs) in the domestic market on payment of duty foregone on inputs as that would help promote value addition. "The main issue in SEZs is that we are not able to get economies of scale. The connect between SEZs and the domestic tariff area (DTA) or domestic market has to be improved. There are also issues if DTA is selling to SEZs," the official said. "So we have suggested duty foregone basis sales. There are also issues with regards to job work. For example if an IT firm has to get some work from the domestic market, they need permission. We have sent a draft cabinet note," the official added. At present, units in SEZs are allowed to sell their products in the DTA on payment of duties on an output basis (finished goods). For these changes, the commerce ministry has proposed amendments in the SEZ law. The government is considering several measures such as a flexible framework for the sale of products manufactured in SEZs in the domestic market, and streamlining approval processes for units. The aim is to help revive SEZs and facilitate business transactions between SEZs and the DTA. SEZs are enclosures that are treated as foreign territories for trade and customs duties, with restrictions on duty-free sales outside these zones in the domestic market. Last year, Commerce and Industry Minister Piyush Goyal said that the government is looking at easing certain restrictions for units in SEZs to promote the sector's growth. Think tank Global Trade Research Initiative (GTRI) in a report has suggested the government allow sale of products manufactured in SEZs in the domestic market on payment of duty foregone on inputs as that would help promote value addition. GTRI Co-Founder Ajay Srivastava had said that the government already allows DTA sales on payment of duty foregone on an input basis to firms operating under the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme. Exports from special economic zones grew over 4 per cent to USD 163.7 billion in fiscal 2024, despite a 3 per cent decline in the country's overall exports. According to the data of the commerce ministry, exports from these zones stood at USD 157.24 billion in 2022-23 and USD 133 billion in 2021-22. SEZs are key export hubs which contributed over one-third of the country's total outbound shipments in the last fiscal. As many as 423 such zones have been approved by the government, out of which 280 are operational as of March 31 this year. As many as 5,711 units are approved in these zones till December 31, 2023. The major export destinations include the UAE, the US, the UK, Australia and Singapore. GTRI Co-Founder Ajay Srivastava had said that the government already allows DTA sales on payment of duty foregone on an input basis to firms operating under the Manufacturing and Other Operations in Warehouse Regulations (MOOWR) scheme. Exports from special economic zones grew over 4 per cent to USD 163.7 billion in fiscal 2024, despite a 3 per cent decline in the country's overall exports. According to the data of the commerce ministry, exports from these zones stood at USD 157.24 billion in 2022-23 and USD 133 billion in 2021-22. SEZs are key export hubs which contributed over one-third of the country's total outbound shipments in the last fiscal. As many as 423 such zones have been approved by the government, out of which 280 are operational as of March 31 this year. As many as 5,711 units are approved in these zones till December 31, 2023. The major export destinations include the UAE, the US, the UK, Australia and Singapore.
Source: Economic Times
Synopsis India's economy showed strong first-quarter performance with surging manufacturing activity, robust GST collections, and record-high Sensex, alongside a rise in passenger car sales and new export orders from overseas markets, as highlighted by industry experts and economic indicators. NEW DELHI: India’s economy ended the first quarter on a strong note with manufacturing sector activity rebounding in June after two months of deceleration while goods and services tax (GST) collections came in strong. Passenger car sales rose further in the month from last year's high base. However, the intense heatwave may have adversely impacted some sectors in the quarter. GST collections rose 8% in June to Rs 1.74 lakh crore from Rs 1.61 lakh crore a year earlier, people aware of the numbers told ET.
Source: Economic Times
India’s textile exports reached US $ 5.86 billion in the first two months of FY ’25, up 5.4 per cent from US $ 5.56 billion in the same time last year, thanks to increased demand for summer clothing in the West, according to figures from the commerce ministry. Cotton yarn, textiles, and handloom goods had an 8.24 per cent increase in exports from US $ 1.8 billion in April and May of last year to US $ 1.95 billion. The post-pandemic recovery in consumer spending, the desire for breathable and light materials in the summer, and the rising demand for ethically and sustainably made clothing from India are some of the causes of this surge in demand. The expansion was also aided by a sharp increase in exports of ready-made clothing. From US $ 2.4 billion in April-May 2023 to US $ 2.55 billion in April-May 2024, the export value of ready-made clothing increased by 4.47 per cent. Handmade carpets and crafts also experienced impressive growth, with exports rising 11.49 per cent to US $ 273.66 million from US $ 245.46 million. Just carpet exports increased 11.76 per cent, from US $ 216.37 million to US $ 241.81 million.Countries that import Indian textiles include Germany, Sweden and Spain. From US $ 210.35 million in April–May 2023 to US $ 223.65 million in April–May 2024, Germany’s imports increased by 6.32 per cent. Spain saw a 4.41 per cent increase in imports from US $ 180.56 million to US $ 188.52 million, while Sweden saw a 15.13 per cent increase from US $ 35.24 million to US $ 40.57 million.
Sources: Apparel Resources
On this GST Day, as the Goods and Services Tax (GST) completes seven years in India, we look forward to further simplification and positive impacts of this tax system across sectors. The implementation of the GST on 1 July 2017 marked the most significant indirect tax reform in India, replacing numerous indirect taxes levied by both the Central Government (such as Central Excise duty, Service tax, etc.) and the State Governments (such as VAT, entry tax, octroi, local body tax, etc.). The pre-GST tax regime suffered from various shortcomings such as tax cascading, complex compliances, and multiplicity of taxes.
The introduction of the GST law has had a profound impact on the various sectors of the economy, some of which are outlined below:
a. Positive Impact:
(i) Various taxes such as entry tax, octroi, local body tax, etc. have been subsumed under the GST law, simplifying pricing decisions and compliances
(ii) The removal of the Central Sales Tax has led to a reduction in the number of stocking points, better inventory management, and a positive impact on working capital.
b. Challenges:
(i) The anti-profiteering provisions, along with the Government’s rate-rationalisation steps, have led to significant demands on multiple companies, creating pricing challenges for the industry.
(ii) Issues surrounding discount schemes and promotional offers, including taxability, adjustments from GST liability and eligibility of Input Tax Credit. Additionally, the treatment of return of expired products and its implementation is another area of concern, particularly in the pharma industry.
2. Information Technology (IT) industry
a. Positive Impact:
(i). Under the previous indirect tax regime, the software was subject to both VAT and service tax. The GST law has resolved this double taxation issue, providing certainty to taxpayers and resolving a litigious issue.
(ii) The subsummation of VAT in GST and consequent availability of ITC have led to significant cost savings for IT companies.
b. Challenges:
(i) The compliance processes and the requirement for registration in all states from where supplies are made, as opposed to the centralised service tax registrations under the previous regime, have increased compliance burdens for IT companies. This expanded registration footprint also involves dealing with GST authorities in multiple states and potential fund blockages in case of refund claims across locations.
(ii) The cross-charge requirement for centralised contracting has added further complications.
3. Logistics industry
a. Positive Impact:
(i) Under the pre-GST regime, different states had varied processes for the movement of goods and accompanying documents, such as waybills (wherever applicable). The GST law has standardised documentary requirements, easing the documentation process. The removal of check posts has also contributed to improved transportation times.
b. Challenges:
(i) The non-inclusion of petroleum products in GST results in a cascading effect of taxes, leading to higher costs.
4. Media and Entertainment
a. Positive Impact:
(i) One of the major issues for the media and entertainment industry was dual taxation, especially in the case of intangibles. This issue has been resolved under the GST regime.
(ii) Similar to other service sectors, the unlocking of credit due to the sub summation of VAT in the GST has a positive impact on the media and entertainment industry.
b. Challenges:
(i) The determination of place of supply, especially in the case of advertisement services provided to the Government and splitting of charges accordingly is challenging. (ii) Similar to all service industries, the compliances in case of media and entertainment have increased due to the requirement of obtaining multiple registrations, and consequent increase in the number of jurisdictional authorities.
The list of issues or sectors is by no means exhaustive and many other positive developments or areas for consideration exist in the above as well as other sectors. Given the approach adopted by the GST council in the recent past, the industry is hopeful that gradually the Government will ease out the unique issues faced by each industry.
Source: Financial Express
Indonesia’s textile industry is said to be “struggling” due to cheaper Chinese imports and continued disruption to global supply chains. after the closure of 21 textile factories in Indonesia, with a further 31 sites said to be “at risk”. The Indonesian Fibre and Filament Yarn Producers Association’s (APsyFI) chairman Redma Gita Wirawasta told Tempo.Co that textile factories in the country are also running at 72% of their capacity thanks to the downturn. Since the Covid-19 pandemic, Wirawasta said Indonesia has seen an increase in the volume of textiles imported from China. APsyFI’s Wirawasta also cited Indonesia’s ASEAN-China Free Trade Agreement (2012) as increasing this trend, as well as the ongoing disruption caused by the war in Ukraine. Local industry body Ikatan Pengusaha Konveksi Berkarya (IPKB) has called the increase in Chinese imports “excessive”, with 60% of its members, who are small and medium-sized businesses, no longer operating. He said those still open are operating at less than 50% capacity. IPKB’s chairman Nandi Herdiaman said: “The domestic market, both offline and online, is being taken over by imported products with unreasonable prices .We are confident that if the domestic market is protected, with at least 70% controlled by local products, Indonesian SMEs will thrive.” APsyFI has also cited concerns around the weakening of Indonesia’s Rupinah currency against the US dollar. General chair of the Indonesian Employers’ Association Shinta Kamdani said: “The textile and garment industry is already weak due to the decline in market share in the domestic market and the decline in the competitiveness of large exports. The depreciation of the rupiah is increasingly putting pressure on this sector.” In June 2024, Indonesia’s viscose fibre industry was said to be experiencing solid growth, driven by a shift in global consumption patterns and significant investments in domestic production capacity. In February 2024, the Bangladesh Garment Manufacturers and Exporters Association (BGMEA)’s President Faruque Hassan met with the Indonesian Ambassador to Bangladesh, H.E. Heru Hartanto Subolo, to enhance bilateral trade, particularly in the apparel and textile sector.
Source: Just-Style
Turkiye's removal from the ‘gray list’ of the global Financial Action Task Force (FATF) and its adoption of more conventional economic policies are expected to boost the inflow of foreign investment into the country, experts feel.
The country has made ‘significant progress’ in improving its regime of anti-money laundering and combating terror financing, the Paris-based crime watchdog said in a statement after its recent plenary meeting in Singapore.
Minister of treasury and finance Mehmet Simsek hailed the decision with the post “We succeeded," on the social media platform X. Credit rating agency Moody's Ratings also said it would contribute to the country’s reputation globally and improve its relationships with European and US institutions.
Legal regulations stopped many international investment funds to invest in countries included in the FATF gray list, said Turkiye Payments and Electronic Money Institutions Association (TODEB) president Ufuk Bilgetekin.
An increase in company mergers and acquisitions is also expected in future following this decision, he said.
Foreign direct investment (FDI) inflows to Turkiye were worth $10.6 billion last year, while the figure was $1.5 billion in the first quarter this year, slightly below the overall quarterly average in the recent period.
Source: Fibre2fashion
India and the United States have extended the validity of an agreement, which allows New Delhi to levy a 2% tax on US digital service providers till June 30, 2024, the finance ministry said on Friday. The tax, known as “equalisation levy”, allows India to tax e-commerce supply of services from American companies, such as Apple, Netflix and others. The agreement, rather a joint statement, has been extended, as no consensus yet has been reached on the Pillar 1 tax package. Originally signed in 2021, between India and US, the statement intended to give India the right to impose the equalisation levy on American digital service providers, until Pillar 1 is implemented. On October 21, 2021, the United States, Austria, France, Italy, Spain, and the United Kingdom reached a political compromise on the transitional approach to the unilateral measures in force while Pillar 1 is implemented. The compromise is reflected in the joint statement that was issued by those six countries on that date.
On November 24, 2021, India and the United States agreed that the same terms that apply under the October 21 Joint Statement shall apply between India and the United States with respect to India’s charge of 2% equalisation levy, said the finance ministry. The validity of this agreement was from April 1, 2022 till implementation of Pillar 1 or Marc 31, 2024, whichever is earlier, which has now been extended till June 30, 2024. Aravind Srivatsan, tax leader, Nangia Andersen said: “The US as expected has rushed to extend the status quo on the rights enjoyed by US MNE on digital taxes (equalisation levy) paid in india, pending a consensus on pillar 1 within the sunset date.” “The overall arrangement is expected to see further extensions till final consensus emerges on Pillar 1,” he said.
Source: Financial Express
