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Indore garment industry faces VAT blow
09
Mar '12
The imposition of five percent value added tax (VAT) announced in the state budget has come as a fresh blow to the garment industry in Indore city of Central Indian state of Madhya Pradesh, which is already facing problems due to inflow of low-priced garments from Bangladesh and China.

Industry analysts say the new levy, along with other existing problems, would lead to closure of the garment industry in Indore in the next few years.

Mr. Ashish Nigam, Secretary of Indore Readymade Garments Manufacturers' Association, told fibre2fashion, “Excise duty was already there on garments and the imposition of additional five percent VAT on fabrics will make our garments more expensive and we will not be able to compete with other states and regions. Hence, the cloth merchants and garment manufacturers are going to meet the CM and submit a request for rollback of VAT on textiles in the state.”

Talking about other problems faced by Indore garment manufacturers, he mentions, “The Government of India has allowed duty-free import of apparels from Bangladesh, which has affected our costing. All big showrooms are now selling 'Made-in-Bangladesh' garments. Besides, garment imports from China are also increasing.”

“On the other hand, we have to pay excise duty and VAT. Due to this, our garments are becoming costlier, while those imported from neighbouring countries are cheaper. This does not bode well for Indore's garment industry and it will have to shutdown in the next 1-2 years, just like the toys industry has closed in India after the arrival of 'Made-in-China' toys,” he adds.

The current situation will also impact employment in the state. Mr. Nigam says, “Illiterate people are also employed by the textile and garment industry. Even women do certain job works from their home.”

“Hence, the government should remove VAT and provide us with more facilities so that the garment industry flourishes and business grows,” he states.

Fibre2fashion News Desk - India

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