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Govt should remove VAT on handloom & handicrafts, ASSOCHAM

15
Oct '09
Mr. D S Rawat, Secretary General, ASSOCHAM
The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has urged the Finance Ministry and the Empowered Committee on VAT to remove the Value Added Tax (VAT) on products of fashion, especially with more than 50% handloom and handicrafts input to make them competitive in the global market.

In a representation sent to Finance Ministry and Empowered Committee on VAT by ASSOCHAM Secretary General, Mr. D S Rawat, it is stated that Indian fashion industry is at budding stage and accounts for barely 0.3% of international industry's networth, which may further come down in the absence of necessary government support.

Currently, fashion products that fall under VAT net ranging between 8-12% and make them costlier and thus dilute their competitiveness, the ASSOCHAM has thus emphasized need for removal of VAT on fashion products, having more than 50% handloom and handicraft input.

The Chamber has argued that the fashion design industry in India is extremely fragmented and unorganized even then it is expected to touch over Rs.800 crore of turnover in next 2-3 years. The present estimated level of fashion design industry is around Rs.300 crores.

Mr. Rawat said that the current market scenario and market dynamics of the designer wear industry in India finds it difficult to build concept and implementation of roadmap for setting up a successful, self-sustaining fashion hubs in India and therefore, the government support to it is the need of hour especially in the form of tax incentives and also need funding assistance.

The ASSOCHAM has also come out with a roadmap for creation of fashion hub which can be possible by implementation of roadmap to be jointly prepared by industry and government with strategic approach for short, medium and long-term.

The ASSOCHAM has recommended that the suggested fashion hubs could be set up provided India looks at successful models of setting up and running fashion hubs in different countries such as USA, France, South Africa, also in emerging markets like Dubai.

Relevant elements could be taken to develop the fashion hub in areas with maximum participation from the government since there are many examples where the government is promoting fashion industry such as France, Japan, Hongkong, USA etc.

In view of ASSOCHAM, the suggested fashion hubs should be set up as an special purpose vehicle (SPV) model under Companies Act.The land should be identified and purchased by the SPV before government puts it in its contribution as equity or grant.

The government equity and grant could be limited to 20% of project costs including facilities like health, spa, hotel and guest fitness centres, subject to a maximum of Rs.20 crore.

Government equity should be released in 4 equal instalments subject to equal contribution having been made by SPV after purchase of land, said Mr. Rawat.

The Associated Chambers of Commerce and Industry of India


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