AEPC submits Pre-Budget Proposal for the year 2011-12

16 Feb '11

4 min read

The Apparel Export Promotion Council (AEPC) has submitted a Pre-Budget Proposal for the year 2011-2012.

With a view to enhance the export-competitiveness of the Indian textile and garment industry, mitigate the impact of above constraints and current economic scenario the following recommendations are put forth:

I Recommendations Related To Direct Taxes
1. Deduction u/s 80IB of Income Tax Act for duty drawback/DEPB The units set up in backward areas were claiming deduction u/s 80IB of Income Tax Act for duty drawback/DEPB and it was legally held admissible by income tax authorities.

Recently the apex court has held that duty drawback receipt/DPEB benefits do not form part of net profits of eligible industrial undertaking for purposes of section 80I/80IA/80IB of the 1961 Act.

These benefits may be restored by the Ministry of Finance to the textile industries located in backward areas like Daman, Silvassa, Dadra and Nagar Haveli which do not have proper infrastructure.

2. Under DTC, MAT should be eliminated.

3. Extension of tax incentives under section 10A/10B of the Act
Section 10A of the Act provides 100% tax deduction of profits and gains derived by an undertaking established in free trade zone, export processing zone etc. from the export of articles or things (from the previous year in which the undertaking begins to manufacture or produce such articles or things) for a period of 10 consecutive AY's subject to the fulfillment of conditions laid down in the section.

Similarly, section 10B of the Act envisages a 100% tax deduction of profits and gains derived by an export-oriented unit ('EOU') from the export of articles or things or computer software for a period of 10 consecutive assessment years (from the previous year in which the undertaking begins to manufacture or produce such articles or things) subject to the fulfillment of conditions laid down in the section.

As per the current provisions of the Act, such deductions would not be available from AY 2012-13. It is recommended that such benefits should be extended to boost manufacture and export of garments.

4. Special Economic Zone ('SEZ') for garments manufacture
As per section 282(n) of the New Direct Tax Code, 2009 ('DTC') [which has been tabled for public debate in August 2009], benefits available to developer of SEZ (under section 80IAB) are sought to be continued for the unexpired period of the tax holiday.

However, benefits under section 10AA are sought to be removed by the DTC. This puts such units is a comparatively disadvantageous position as compared to other units/undertakings (say under section 80IA, 80IB, 80IAB etc) in respect of which tax incentives have been continued.

We urge that benefits (akin to the current section 10AA of the Act) should be provided to Apparel export units.

Even under DTC, either, a special mechanism for computation of profits of such Apparel export units or a continuation of benefits provision for the unexpired period of the tax holiday (akin to section 282(n) of the DTC) should be considered.

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