Apparel exporters body AEPC on Saturday urged the government to announce tax incentives, including removal of a provision requiring payments to MSMEs within 45 days to claim deductions and customs duty exemption on garment machinery imports.

The Apparel Export Promotion Council (AEPC) has also requested that an interest equalisation rate of 5 per cent be announced in the Budget, scheduled to be unveiled on February 1 by Finance Minister Nirmala Sitharaman.

Other demands include extension of concessional tax rate for new manufacturing units to encourage setting up of new garment units; simplification in the procedure of imports of trims and embellishments under IGCR (Import of Goods at Concessional Rate); and liberalising e-commerce export procedures.

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“Ready Made Garments (RMG) industry has also demanded removal of Sec43B (H) of IT Act in the ensuing Budget which pertains to payment to any MSME companies within a maximum 45 days’ time to claim any deduction in tax. This has increased tax liabilities and has disrupted the cash flow of exporters,” it said in a statement.

It added that the cap per consignment of export value under e-commerce should be increased to minimum ₹25 lakh and export realisation period should be extended to 12 months.

India’s garment export sector relies heavily on imported machinery to maintain quality and global competitiveness, as domestic production is insufficient to meet demand.

“High import duties make Indian garments exports less competitive vis-a-vis countries like Bangladesh and Vietnam. AEPC recommends not only continuing existing exemptions but also reducing the customs duty to zero on remaining garmenting machinery to enhance the sector’s efficiency,” it said.

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AEPC Chairman Sudhir Sekhri said, “The Union Budget is a great opportunity where our demands for long-term policy support can be considered.”

AEPC Secretary General Mithileshwar Thakur said there is an urgent need to quickly adopt right strategies to take advantage of evolving supply chain reorientation.

“The Indian apparel sector is on a high growth trajectory and has the potential to outpace global competitors with upscaling of production capacity, channelising investments into the sector, upskilling of workforce and labour reforms,” Thakur said.