Pest Analysis of Retail Apprel Industry

Topics: Tax, Value added tax, Indirect tax Pages: 11 (3452 words) Published: March 13, 2013
PEST Analysis of Indian Market for the Apparel Industry

1.Political Factors:

The proliferation of international trade and liberalization of the global trade regime has dawned in India with the implementation of several programs by the Government of India (termed as GOI from now onwards in the report) to help the textile and apparel industry adjust to the new trade environment. In 2000, the GOI unveiled its National Textile Policy (NTP) 2000, aimed at enhancing the competitiveness of the textile and apparel industry and expanding India’s share of world textile and apparel exports to 10 per cent by 2010 from the current 3 per cent level. Some of these measures taken by the GOI were substantial to facilitate the Brand Accessory Industry too - label and packaging industry, for brand value addition. Under the NTP 2000, the GOI removed ready-made apparel articles from the list of products reserved for the SSI sector. As a result, foreign firms may now invest up to 100 per cent in the apparel sector without any export obligation. This policy equally holds strong for the Branding Sector – Label & Tag industries. The GOI grants automatic approval within 2 weeks of all proposals involving foreign equity up to 51 per cent in the manufacture of textile products or related branding items in the composite mills. Foreign investment up to 50, 51, 74 and 100 per cent in priority industries/activities, is eligible for automatic approval by the Reserve Bank of India (RBI).

Automatic approval is also available for holding equity up to 51 per cent in trading companies engaged primarily in export activities. In addition, 100 per cent Export Oriented Units (EOUs) and units set up in designated Export Processing Zones (EPZs) are eligible for automatic approval provided they satisfy stipulated criteria. Foreign technology agreements are also eligible for automatic approvals within certain limits.

Tax Policies
India has a well-developed tax structure, with the authority to levy taxes divided between the Central Government and the State Governments. The Central Government levies direct taxes such as personal income tax and corporate tax and indirect taxes such as customs duty, excise duty, central sales tax and service tax. The states are empowered to levy professional tax and state sales tax apart from various other local taxes like entry tax, octroi, etc . Foreign collaboration and investment are subjected to direct and indirect taxation, though indirect taxes such as customs, excise and sales tax do not affect the income stream of the investment the impact of income-tax is a crucial area which determines the investment strategy of the investor. Tax policies are also important to be intervened in effect to the Branding Solution Industry.


Corporate Tax Liability
Resident Organizations incorporated in India or having its entire management and control in India is taxed on its worldwide income. However, a non-resident corporation (foreign company) is taxed only on income derived in India from Indian operations, income that is deemed to arise in India and income that is received in India at a rate that differs on the basis of category of the company like domestic and foreign. The foreign collaborators presume to stay as non-residents unless the control and management of its affairs is wholly situated in India.

Minimum alternate tax (MAT)
MAT is levied currently at the rate of 7.5 per cent of book profits of the companies where tax under normal provision is less than 7.5 per cent of book profits.


Excise Duty
In case, foreign investors are interested to set up production or manufacturing facilities in India, excise duty is a tax levied on the manufacture of goods within the country, governed by the Central Excise Act, 1944, and the Central Excise Tariff Act, 1985. The term ‘manufactures ‘has been interpreted to mean bringing into existence new article having a distinct...
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