CMAI Anticipates Rs 5,000-7,000 Crore Loss To Apparel Sector

Indian MSME apparel manufacturers may face a loss of Rs 5,000-7,000 crore in the January-March quarter according to the Clothing Manufacturers Association of India (CMAI).

CMAI said an amendment in the Income Tax Act states that payments to MSMEs need to be made within 45 days. CMAI claimed that this has pushed retailers to cancel orders with MSMEs.

The Indian garment sector typically follows a credit payment cycle of 90-120 days and in some cases extends to even 180 days.

“It is common for even big retailers to follow this timeframe for settling payments,” CMAI added in a press release.

“The expectation for retailers to amend their business models immediately to accommodate a 45-day payment cycle is highly unrealistic,” CMAI stated.

According to the trade body, a significant number of retailers are contemplating return of unsold goods to manufacturers, thereby absolving themselves of the obligation to pay for these products.

“Retailers will now place orders with manufacturers that don’t fall under the MSME bracket and where they do not have to comply with payments to be made within 45 days,” Rahul Mehta, Chief Mentor at CMAI explained.

CMAI has submitted recommendations to Union Finance Minister, Nirmala Sitaraman and has requested her to withhold implementation and introduce a step by step reduction in credit days over a period of three years.

The apparel industry trade association also recommended exempting payments from one MSME member to another MSME member from the ambit of the amendment