Looking Ahead with Hope!
Decoding the Expectations of the Apparel Industry from the Union Budget 2018
The last Union Budget of India was all about broad growth across the various sectors of the economy. It was drafted taking into account needs in the aftermath of demonetisation, in addition to the overarching strategic needs for India’s rise as an economic superpower. With a quarter of investments directed towards the funding of the rural, agricultural and allied sectors, it presented an encouraging picture of development, while lowering the individual tax rate for a majority of the consumers. This combination of features generated a generally favourable consensus towards the budget. However, it made no new or significant proposals for the apparel and textile industry in particular.
This wasn’t surprising for many in the industry since the government had already announced the R6000 crore package in 2016. At the time, the Goods and Services Tax implementation was still months away and the optimism over its effectiveness seemed obvious, especially, given the government's strong assertion with regards
to its immediacy. Given the seemingly temporary cash crunch in the industry, the roll out of the GST was not predicted as a further inconvenience. However, this prediction proved false. The GST reform came into effect with much fanfare, but also an equally prominent discourse of criticism from consumers and businesses alike. So, as the next year’s budget brings its discussions and planning, we are again mired in speculation. We attempt to set aside wanton speculation and present a level headed analysis of the current state of the apparel and textile industry, while considering what can be reasonably hoped for, given the track record so far.
GST RELIEF AND REVISION
The 2018 Union Budget will be the first budget to be released after the implementation of the Goods and Services Tax. It is no surprise then that a significant component of the budget is expected to revolve around the consequences of that reform. It is important to remember that even though the GST was implemented in July, the earlier budget carried Customs Duty, Central Excise and Service Tax as the projected tax revenue. However, not this revenue stream is classified under the GST and with the budget reclassifying revenue intakes. The next Budget will include a new classification for revenues projected as accrued under GST, possibly under two accounting periods of April-June for excise, Customs and Service Tax, and July-March for GST and Customs Duty. In this regard, the upcoming budget will no longer outline the proposals to do with Excise and Service Tax since they would be mandated by the GST Council. Only direct tax proposals, i.e., Personal Income Tax, Corporate Tax and Customs Duty are expected to be included in the 2018 Budget.
Beyond the predictable changes mentioned earlier, there has also been a reference, however obliquely, from the Finance Ministry with regards to the GST itself. It is no secret that the GST implementation has received a controversial reaction from many. From the regular consumer who has found retailers hiking up prices to businesses who have struggled to make sense of the new regulations. Even the selection of taxation slabs has seen revisions from the government in response to popular outcries. In this context, the need for a more thoroughly revised and reworked GST policy is being considered. The Ministry has made overtures proposing a rationalisation of the rates as being simplified under three slabs, from the existing five slabs of zero per cent, five per cent, 12 per cent, 18 per cent and 28 per cent. These changes are proposed for an undetermined time in the future, but speculation appears to be that this could be under the upcoming tax bill. Already,