Tax concession on staff house construction by garment units in Tiruppur, setting up a research and development (R&D) centre at Tiruppur and offering market promotion support to industry associations as available to export promotion councils are some of the recommendations forwarded by the Tiruppur Exporters’ Association (TEA) to the finance minister for the next budget.
In a press release, TEA president Raja M Shanmugham said the association has a target of constructing a lakh houses for migrant workers in the next five years, primarily to address labour shortage issues and to achieve better utilisation of machinery, apart from enhancing productivity and quality.
In cases, where the units contribute the amount voluntarily for construction of houses to their own workforce, their contribution has to be treated as allowable business expenditure similar to Section 37 of the Income Tax Act, 1961, preferably providing weighted deduction or at least deduction, TEA pleaded.
An R&D centre at the cluster will be beneficial to accelerate the pace of industrial growth and the government can offer cent per cent exemption from income tax. A new scheme called Remission of Duties and Taxes on Exported Products (RoDTEP) has been introduced from January 1 this year and this is available for all physical exports, but the RoDTEP rate has not yet been notified. The concern is that the benefit under RoDTEP scheme shall not be allowed if benefits of the Advance Authorisation Scheme has been availed.
TEA pointed out that the availment of advance authorisation does not lead to the complete zero-rating of the exports. Exporters even after procuring certain inputs under advance authorisation still have to incur many costs (in the form of indirect taxes) that will get embedded in the price if not remitted. Such direct costs are indirect taxes on electricity, freight and fuel.
There will also be indirect costs in terms of customs duties borne by the domestic supplier on his imports that are used in further making the domestic supplies to exporter which are in turn used by the exporters for manufacturing and exporting the finished goods.
TEA requested the finance minister to provide proportionate benefits to exporters availing the benefit of advance authorization as well.