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In 2017, Vietnam’s textile and garment industry earned US$31 billion from exports, a year-on-year increase of over 10 percent. This growth momentum will continue in the next few years, with exports predicted to reach US$34-35 billion this year, and US$50 billion by 2020. Garment manufacturing accounts for the majority of businesses, at 70 percent.
In 2017, garment exports reached US$25.9 billion, an increase of 8.7 percent year-on-year, while textile exports reached US$3.5 billion, an increase of almost 20 percent compared to 2016. However, Vietnam’s imports for textile production are almost half of their exports, at US$15.48 billion, highlighting the need for increased domestic sourcing to minimize trade surplus. Industry growth is not only limited to exports, but also the domestic market, which has seen a year-on-year growth of 10 percent in 2017.
Growing exports
In Q1 2018, Vietnam’s textile and garment’s export value reached US$7.83 billion, an increase of 15.4 percent over the same period in 2017. This was the highest first-quarter growth since 2014.
In Q2, the export value is estimated to reach US$8.5 billion, while the growth rate for the first six months is forecast to go up 14 percent compared to same period last year. Overall, in 2018, the industry can achieve a growth rate of 10 percent, with export value reaching US$34-35 billion.
Key markets
In addition to the US, the major market for Vietnamese textile exports, exports to China, Japan, and South Korea have been growing consistently. In Q1 2018, exports to the US reached US$3.14 billion, an increase of 13.2 percent compared to Q1 2017, its highest in three years.
Exports to Japan, South Korea, and China during Q1 2018 grew by 27 percent, 22.3 percent, and 26 percent year-on-year respectively. Exports value stood at US$958 million, US$896 million, and US$832 million respectively. On the contrary, exports to EU grew by a modest 1 percent to US$1.13 billion in the first three months of 2018.
Growth factors
Increased market access through free trade agreements and technology are the major growth drivers for the textile and garment industry. Vietnam’s bilateral and multilateral FTAs continue to provide Vietnamese manufactures access to new markets, minimizing the effect of growing trade protectionism. With new FTAs to be in effect such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and Vietnam-EU FTA, new markets will lead to higher exports and push manufacturers to develop the industry’s supply chain so that they can take full advantage of the preferential tariffs and increase the competitiveness of their products.
Going forward, market access alone will not be enough to generate growth and Vietnamese manufacturers would also need to invest in technology to increase productivity, quality, and remain competitive, especially Industry 4.0 technologies.
FDI
Between 2012 and 2016, the industry has attracted over US$5 billion in foreign direct investment (FDI). FDI for this year until April 2018 stood at US$1.1 billion, with majority directed towards yarns and textiles.
China, Taiwan, Hong Kong, Japan, South Korea, Thailand, the US, the EU, and Russia continue to lead in investments in the textile and garment industry.
Industry forecast
According to the Vietnam Textile and Apparel Association, the industry’s exports value will reach US$34-35 billion this year, and around US$50 billion by 2020. Between 2016 and 2020, production capacity is expected to grow 12-14 percent, while export potential will annually grow by 15 percent during the same period.
Looking ahead
Although exports are predicted to grow, Vietnamese manufacturers need to focus on value addition. Vietnam continues to depend on raw imports, which makes it harder for firms to take full advantage of the free trade agreements with tough “rules of origin” conditions.
In addition, rising labor costs in China are pushing firms to countries like Cambodia, Bangladesh, and Vietnam which has been beneficial for the industry. However, Vietnam needs to continue investing in technology and training if it wants to remain competitive in the region.
Archives
The Southern India Mills’ Association, with textile mills in south India as its members, plans to come out with a code of conduct shortly on employment of migrant workers.
The association chairman P. Nataraj has said in a press release that textile mills in Coimbatore, Tirupur, and Dindigul have 30 % to 90 % of their workforce from other States.
The numbers are increasing steadily. However, the mills face challenges in terms of getting the right workers, training, and retaining them. The code of conduct will give broad guidelines on employing migrant workers and is a pro-active measure to make the system successful.
The association proposes to sign an agreement shortly with the British Standard Institute for this.
Further, the placement cell of the association decided to go in for direct recruitment of workers from various States for its member mills.
It had written to many States and the Government of Tripura responded. It came forward to support the association for organising a job fair and recruiting workers.
A job camp was held at Agartala on April 25 and 26 and 4,000 unemployed youth from different parts of Tripura took part.
This included women and the disabled too. Seven textile mills from Tamil Nadu took part and recruited 1,635 workers. Of these, 264 are women.
These candidates will be trained for at least 300 to 400 hours at the mills and when they are employed as apprentices they will be paid the minimum wages prescibed by the Government of Tamil Nadu.
GST Network to become 100% govt. enterprise; Ministers to study cess on sugar
The Goods and Services Tax Council on Friday decided to convert the GST Network into a 100% government enterprise, and implement a single form for GST filing from the current three.
At its 27th meeting, the Council also decided to create a Group of Ministers to review the plan for imposition of a cess on sugar. The cess was meant to subsidise sugarcane farmers as their production cost is much higher than the selling price.
Returns filing reconciled
The Council has also decided to create another GoM to consider implementation of a 2% incentive for digital transactions. “There has been a discussion over the last several months on one method of return filing that Nandan Nilekani had suggested and another that the officials from the State governments had suggested,” Union Finance Minister Arun Jaitley said at a press conference after the video-conference meeting. “The Sushil Modi Group of Ministers has found a reconciliation between the two.”
Finance Secretary Hasmukh Adhia said the Council approved a single, monthly return form that would become applicable in six months. The current system of filing the GSTR-1 and GSTR-3B forms would continue till then. “After six months, there will be a single monthly return for everybody, except composition dealers and those who file returns with zero transactions,” he said. “They can file quarterly returns.” After this, for six more months, businesses will be able to avail provisional credit in the new form, even if their sellers have not uploaded their sales invoices.
“During these six months, the GST Network will continuously feed the dealer data about what is the gap between what he is claiming as provisional credit and what is the actual amount he should be getting based on sellers’ invoices,” he said.
Prabhu said he is holding talks with various countries to explore new markets for Indian fabrics, garments and apparels in order to boost exports, as he said the industry is working in ‘sub-optimal’ level for its over-dependence on the European Union and the US for exports.
Union commerce and industry minister Suresh Prabhu today stressed on the need to promote the textile industry to give a boost to the manufacturing sector, as he claimed that the sector contributes only 16 percent to the country’s GDP at present.
Prabhu said he is holding talks with various countries to explore new markets for Indian fabrics, garments and apparels in order to boost exports, as he said the industry is working in ‘sub-optimal’ level for its over-dependence on the European Union and the US for exports.
“Contribution of manufacturing sector is only 16 percent to our economy. It is also a fact that the textile sector is a major player in that contribution. But, when only 16 percent of our GDP comes from manufacturing, it is not enough for a sustainable economy. Thus, it is necessary to scale up that contribution,” said Prabhu.
He was speaking here today at the inaugural ceremony of the three-day ‘Farm to Fashion – Indian Textile Global Summit 2018’, organised by the Gujarat Chamber of Commerce and Industry (GCCI) as well as Maskati Cloth Market Mahajan.
Current system to stay for six months, the next half-year will see system of provisional credits.
The Goods and Services Tax Council on Friday approved a new comprehensive return-generation system and full government ownership of GST Network (GSTN) — the IT backbone for GST — while referring a proposal to impose a cess on sugar and an incentive scheme for digital transactions to two separate groups of ministers (GoMs) for further deliberations.
As reported by FE earlier, despite the council’s nod, the new returns system can be implemented fully only after a year. The system will allow taxpayers to just upload invoice-wise details of sales while the system will generate the returns. The IT system will also calculate the tax liability and input tax credit (ITC) availability on behalf of the assessee and provide for a semi-automatic reversal of credits.
For the next six months, finance secretary Hasmukh Adhia said, taxpayers will continue to file summary return GSTR-3B and GSTR-1 (outward supply details). After that, he said, the new system will be put in place but assessees will be allowed to claim provisional input tax credit for a period six months, which means a taxpayer can seek the credit even when the supporting invoices aren’t uploaded by the seller.
During this (provisional credit) phase, a dealer will be constantly fed with information about the gap between credit available to him as per invoices uploaded by the sellers and the provisional credit claimed. In the next phase, the system will not allow provisional credit claim as ITC would be available only on the basis of invoices uploaded by the sellers, Adhia added.
However, the buyer will be made responsible for credit claimed on purchases for which the supplier has defaulted in tax payments. “We will use legal methods to recover tax from the seller but in circumstance where its not possible, reversal of credit from the buyer will also be an option,” the finance secretary said.
Earlier, a group of ministers headed by Bihar deputy chief minister Sushil Modi had recommended the returns model, by combining the features of two other models, including one mooted by Infosys non-executive chairman Nandan Nilekani.
Separately, citing the ‘state functions’ performed by GSTN, the council approved a proposal for the Centre and states to jointly (and equally) acquire the entire 51% of equity held by the non-governmental institutions in GSTN amounting to Rs 5.1 crore. The GSTN board will initiate the process for acquisition soon. Currently, the Centre and states jointly own 49% in GSTN (24.5% each), while the rest is held by five other entities, including LIC Housing Finance, HDFC Bank and ICICI Bank. Finance minister Arun Jaitley said that the the state governments have GSTN stakes on a pro rata basis depending on their GST revenue profile.
However, to ensure that GSTN continues to be nimble-footed like a private company, the council allowed it to continue with the existing staff at existing terms and conditions for a period of up to five years. The GSTN board will also retain the the flexibility of hiring people through contract on the terms and conditions similar to those used by GSTN till now while hiring regular employees, the minister said.
Sachin Menon, partner and head, indirect tax, KPMG in India, said: “Converting GSTN into a 100% government company is welcome. I hope it will not affect its functional efficiency and ability to take quick and proactive decisions to address the tax payers’ concerns.”
On the issue of promoting digital transactions, Jaitley said that majority of the council members supported the proposal but some members suggested that a negative list of items should be created for the same. Subsequently, the council decided to defer the matter to a GoM (of state ministers) for recommending solutions.
The proposal in its current form would provide concession of 2% (1% each from central GST and state GST) on the GST rate — where the rate is more than 3% on business-to-consumers supplies if the payment is made through cheque or other digital mode. However, the concession would have a ceiling of Rs 100 per transaction.
The council constituted a second GoM on the issue of imposition of cess on sugar to help mills clear cane dues owed to farmers. The proposal was to create a fund from the cess proceeds to finance the gap between the cane price mills can pay to farmers in accordance with a revenue-sharing formula recommended by the Rangarajan committee and the benchmark rate — fair and remunerative price (FRP) • fixed by the central government. Jaitley said that council discussed whether such contingencies could be addressed through such imposts, tax rate hikes or alternative systems of revenue generation. Only Uttar Pradesh and Maharashtra were in favour of the cess move as the it wouldn’t benefit other states, West Bengal finance minister Amit Mitra said. “The decision of sugar cess has been deferred for now, it would be ideal if it is not introduced given it was abolished when GST came in and GST was expected to subsume all such levies. If there is need for revenue augmentation, it can be done by increasing the GST rate rather than distorting the overall structure,” said Pratik Jain, partner and leader, indirect tax, PwC India. MS Mani, senior director, Deloitte India, said: “The staggered introduction of the new returns would enable businesses to prepare for the same and make changes to their systems; businesses are relieved that they would no longer be penalised for their vendors omissions. Simplicity of the new returns would be key to its successful adoption by businesses as past experience with complicated forms and processes indicates that complexity reduces compliance.”
Telangana Pradesh Congress Committee (TPCC) President Capt. N. Uttam Kumar Reddy on Friday demanded that the State Government extend immediate financial assistance to farmers who were hit due to unseasonal rains that lashed various parts of Telangana.
Uttam Kumar Reddy said lakhs of quintals of paddy, maize and other farm produce which were brought to market yards for sale has been damaged causing heavy loss of crores of rupees. Similarly, farmers have suffered extensive damage due to loss of standing crops in many parts of the State. Besides paddy, maize, cotton and chilli, mango crop suffered the most. Vegetable crops were also damaged due to sudden heavy downpour. He demanded that the State Government conduct enumeration of losses by sending teams of officials to affected regions so as to seek Central relief. However, he said the State Government should pay immediate compensation to the affected farmers.
The TPCC Chief pointed out that this was the third time this summer that farmers in many parts of Telangana had suffered crop losses due to unseasonal rains. Stating that at least 10 people have been killed in rain-related incidents so far, he demanded that ex-gratia be paid to the families of victims.
Uttam Kumar Reddy also directed the Congress cadre to visit the affected areas and meet the victims to extend all necessary help.
The Central Committee on assessment and investigation of spread of unapproved BG-3 cotton trait hailed Telangana government’s efforts to curb its entry into the market through various methods, including constitution of a special task force.
Speaking to Telangana Today from New Delhi, Seed Certification Agency Director Dr K Keshavulu said the committee highlighted the importance of taking action against widespread cultivation of unapproved BG-3 cotton in the country. He said the State government identified the entry of the unapproved trait and alerted the Central government and other States.
Keshavulu said the committee directed all States to take stringent measures to destroy BG-3 in fields, stock points and in other places. He said based on the directions of Principal Secretary (Agriculture) C Parthasarathi, a detailed report on BG-3 cotton and its ecological impact was submitted to the Central government, which became a guiding factor for the committee to take decisions.
He said the task force constituted by Telangana was conducting raids on stock points, fields and shops across the State and seized BG-3 cotton, apart from registering cases.
INDICATIVE prices for cotton for the 2018/19 harvest season will be 1,100/- per kilogramme, slightly down from 1,200/- of the previous season due to global decline of cotton price, the government has announced.
Launching the new cotton harvest season in Igunga District, Tabora Region yesterday, the Minister for Agriculture, Dr Charles Tizeba, said there would be a slight decline in prices this season due to low prices of the crop in the world market.
“Cotton prices in the global market are low and thus in the 2018/19 season the price will be 1,100/- per kilogramme,” he said, adding that most of the cotton sold to the world market was raw, thus fetching very low prices. “It is from this backdrop that the government is emphasizing industrial development to ensure that all the cotton produced in the country is consumed locally.
” The minister said the government would pay 30bn/- debt owed by farmers from purchase of insecticides and announced in the 2019/20 cotton season, farmers will be given for free cotton seeds, insecticides and ropes for planting cotton.
Tanzania Cotton Board (TCB) Director General, Marco Mtunga, said cotton production in this season has increased by 400 per cent to 600,000 tonnes compared to 132,000 tonnes last year. “Due to increased cotton production, it should be ensured that farmers get reliable markets to sell all the cotton produced,” he said.
He said also that land used for cotton production increased to 3 million hectares from 650,000 hectares with 26,500 tonnes of cotton seeds used.
He said all the cotton this season will be bought through the Agricultural Marketing Co-operative Societies (AMCOS). All the regional commissioners, district commissioners, co-operative societies and registrar of cooperatives should ensure that farmers are paid accordingly.
He said all the farmers’ payments should be paid through bank accounts within three days after selling their cotton to the cooperative societies and all buyers are supposed to buy from cooperative societies only.
Cotton is being produced in 17 regions including Mwanza, Simiyu, Shinyanga, Geita, Mara, Kagera, Tabora, Singida, Kigoma, Katavi, Dodoma, Morogoro, Coast, Tanga, Kilimanjaro, Manyara and Iringa.
BEIJING – A recently-established Chinese non-profit organisation has set out its ambitious goals which include the inception of a China Fashion Sustainability Alliance, a move it hopes can open the nation’s fashion and textile industries up to engagement on the world stage.
The initiative’s founder has spoken exclusively to Ecotextile News to discuss what lies ahead for the movement, including the announcement that it will host its first event in 2019 and perhaps most significantly, confirming support for the organisation from both central and local government.
Availing of provision credit by businesses also on agenda
The main item on the agenda for the GST Council meeting on Friday is likely to be the simplification of the return filing system into a single form and a decision on whether businesses can avail of provision credit or not, according to tax analysts.
According to the GST law, the return filing process involves three forms — two of which have been kept in abeyance to ease the compliance process for businesses. The GST Council is to decide on how best to reduce these into a single form.
“Tomorrow’s [Friday] meeting will primarily deal with the revised returns issue,” said Pratik Jain, Indirect Tax Leader, PwC India. “The Sushil Modi-led Group of Ministers met with all the stakeholders over the last one month, such as CII, FICCI, and some select indirect tax experts, and received inputs from them. So that’s what the Council will discuss, which model of return filing to go for,” he added.
So far, there are two models of return filing under consideration, with the key difference between the two being whether businesses can avail of provisional credit when the supplier has not yet filed returns, or if they can only avail of the credit based on the returns filed.
“What we have been waiting to hear is what the Council wants to do regarding provisional credit,” said Archit Gupta, founder and CEO of Cleartax. “Once they put GSTR-2 and GSTR-3 on hold, what is the manner in which they want people to report their purchases and should people continue to claim provisional credit?”
“Right now, there are at least three return forms as prescribed by the law,” said M.S. Mani, Partner at Deloitte India. “That three-stage process is going to be brought down to a one-stage process. The debate over that one-stage process is whether the buyer will be able to take the credit irrespective of the seller’s payment of the tax or should the buyer be able to take provisional credit, and later on if the seller does not pay, then the buyer reverses the credit.”
‘Advantage buyer’
“That is where there is a lot of debate,” Mr. Mani added. “To me, it seems that they will settle on a system where the buyer can take the credit even if the seller does not pay, because it is unfair to blame the buyer for the seller’s mistakes.”
The other issue that could come up for discussion is the revival of the reverse charge mechanism, applicable for registered dealers doing businesses with unregistered dealers.
“There was one provision in the law that when a registered dealer bought from an unregistered dealer, then the registered dealer pays tax on behalf of the unregistered dealer and takes the input tax credit,” Mr. Mani explained. “While this was revenue neutral for the buyer, it created a lot of compliance issues for the registered dealers. Therefore, the government kept this in abeyance. After discussion, this is expected to be revived.”
Other issues that could come up for discussion include the delay among certain States in rolling out the e-waybill system for intra-state movement of goods. While the e-waybill system was rolled out across the country for the inter-state movement of goods on April 1, the billing mechanism for the intra-state movement of goods was to be rolled out across States in a phased manner.
As of April 25, 17 States and Union Territories have implemented the system for intra-state movement, but the rest of the country, including manufacturing States such as Maharashtra and Tamil Nadu, have still not done so. The reasons behind the delay of the roll-out by these States could be a topic of discussion during the meeting, according to tax analysts.
