The Union Cabinet chaired by Prime Minister Narendra Modi has approved a set of tax and production incentives to create employment opportunities in the garment manufacturing sector. Moreover, amendments have been made in labour laws to make them more flexible. These steps will lead to a cumulative increase of US $ 30 billion in exports with an investment of Rs. 74,000 crores over the next three years.
These measures are a part of the Special Package announced to create 1 crore jobs in three years’ time in the textile and apparel sector. Looking at the seasonal nature of the garment industry, the provision of 240 days under Section 80JJAA of Income Tax Act would be relaxed to 150 days for the sector. The subsidy provided to garmenting units, under Amended-TUFS, has also been increased from 15 per cent to 25 per cent, thereby providing a boost to employment generation. The Government will bear the entire employer’s contribution of 12 per cent, under the EPFS, for new employees in garment industry earning less than Rs. 15,000 per month, for the first three years. This marks an increase from the present provision of 8.33 per cent towards employer’s contribution, being provided under Pradhan Mantri Rozgar Protsahan Yojana (PMRPY).
With today’s decision, Ministry of Textiles will provide the remaining 3.67 per cent share towards employer’s contribution, amounting to Rs. 1,170 crores over the next three years. This is expected to make the following impact in next three years – increase in exports by US $ 2.6 billion, increase in employment by 12.25 lakh, and increase in investment by US $ 7 billion.
Furthermore, overtime hours for workers will not be allowed to exceed 8 hours per week in line with ILO norms. This shall lead to increased earnings of the workers. Considering the seasonal nature of the industry, fixed-term employment will be introduced for the garment sector workers. A fixed-term workman will be considered at par with permanent workman in terms of working hours, wages, allowanced and other statutory dues. It also says that EPF will be made optional for employees earning less than Rs. 15,000 per month. This will leave more money in the hands of the workers and also promote employment in the formal sector. The Government claims that these measure will increase in exports by US $ 1.4 billion, increase in employment by 1.75 lakhs and increase in investment by US $ 4.2 billion.
Another push for the industry is enhanced duty drawback coverage which is being claimed as first-of-its-kind move… A new scheme will be introduced to refund the state levies which were not refunded so far. This move is expected to cost the exchequer Rs. 5,500 crores but will greatly boost the competitiveness of Indian exports in foreign markets. Drawback at All Industries Rate to be given for domestic duty paid inputs even when fabrics are imported under Advance Authorization Scheme.
