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Toy Manufacturing - BIS Compliances, Schemes, and Incentives

One of the key flourishing industries in the world, India’s toy market is currently valued at $500 million out of a booming $90 billion global market. Statistics reveal that 80% of Indian toys are Chinese imports, while non-branded Chinese toys account for 90% of India’s market. Even though exports by the toy manufacturing industry from India amounted to $130 million during 2019-2020 with the USA and UK [1]being the lead exporters, the disparity and unutilized potential do not escape one’s attention.

As the second-most populated country in the world with almost 26% of its population below 15 years old, India has one of the largest consumer bases in the world. In fact, when the global average for demand growth is 4.6% [2]it is forecasted to have a growth of 13.3% CAGR [3]within 2026 i.e. almost thrice the global average. Adding on to this the toy industry of the country is also expected to reach $3.3 billion dollars by 2024!

India’s economic growth has also increased the disposable income of its citizens, thus driving up demand in a market with a whopping consumer base of roughly 338 million. Moreover, there has been a major shift from traditional, medium- to low-end battery-operated toys, towards innovative electronic toys, intelligent toys as well as upmarket plush toys.[4] The boom of e-commerce in India has also had a role to play, with customers turning to shop for toys within the comfort of their own homes.

Associations and Committees Representing the Toy Industries in India:

 

1.Toy Association of India

  • Headquartered in New Delhi, the toy Association of India was established in 1995 with a view to bringing together toy manufacturers, traders and end-users to promote higher business relations.
  • It has a presence all over the country and has 600 registered members, out of which 275 are toy manufacturers.
  • Assists the toy industry in up-gradation of the industry’s units with modern machinery to maintain quality standards.
  • Attempts at creating a more conducive relationship between the government and the industry by offering policy recommendations, communicating the industry’s problems in the interest and growth of the toy industry.

2.The All-India Toy Manufacturer’s Association

  • Headquartered in Mumbai, All India Toy Manufacturer’s Association has nearly 150 registered members, out of which 100 are toy manufacturers.
  • It seeks financial assistance and subsidies from the government for the growth of the toy industry, educates and encourages suppliers to conform to the BIS regulations. 
  • Encourages the organization of toy fairs and exhibitions for the promotion of the toy industry.

 

Compliances Requirements for Toy Manufacturing Industry under the Bureau of Indian Standards (BIS) 

Apart from the general compliances which amount to over 700 ranging from the Companies Act, SEBI Act, FEMA Act to Income Tax and Foreign Trade Act for factories and MSME’s, regulations were required to be specifically made to ensure that the toy industries are safeguarded from unfair and excessive exploitation as well as products meet the international quality requirements.

According to a study, about 67% of toys sold in India had failed all safety and standard tests, while about 30 per cent of plastic toys failed to meet the safety standards of admissible levels of heavy metals and phthalates. Phthalates are a group of chemicals.

A lack of regulation in the past had resulted in degradation of the quality of our products and failed endeavours to keep up with the international standards. However, this is no longer the case as the government has not only strengthened the existing key factors but has also set up new compliances to steer clear of the past policy miscalculations and lapses. The said compliances are as follows:

The Toys (Quality Control) Order, 2020[5]

Issued by the DPIIT, Ministry of Commerce and Industry, vide order 25 February 2020, the safety of toys has been brought under compulsory BIS certification, which is granted after the successful assessment of the manufacturing infrastructure, production process, quality control, and testing capabilities. The toys shall bear the standard mark under a licence from BIS as per Scheme-I of Schedule II, of BIS (Conformity Assessment Regulations), 2018. The said QCO was initially slated to come into effect from 1st September 2020 but was later extended to 1 January 2021[6].

Exceptions:

  • The order is not applicable to goods and articles manufactured and sold by artisans registered with the Office of Development Commissioner (Handicrafts), under the Ministry of Textiles.
  • The order is not applicable to goods and articles manufactured and sold by registered proprietor and authorized user of geographical indication, by the registrar of geographical indications, Ministry of Commerce and Industry.[7]
  •  Goods or articles manufactured/meant for export purposes.

BIS Licence and Certification

For the purpose of BIS certification, toys have been classified into the following two categories. While applying for a licence, the manufacturer can apply under any one of the classifications:

 

If a licence is required for more than one type of toy (i.e., non-electric and electric), separate applications shall be made for each type. (However, samples shall be tested by BIS for conformity to the primary standard and the secondary standards which are applicable i.e., IS 9873 parts 1,2,3,4,7, and 9 etc.)[1]

While applying for a license the manufacturers must also specify the type of toy in order to choose the applicable standard it would be subjected to. The specifications of toys and their corresponding standards are as follows:

 

For Entities Manufacturing hundreds of toy models/SKU’s
  • Since testing hundreds of toy samples individually shall prove to be practically difficult for the purpose of BIS certification. The issue has been addressed in the Product Manual for the safety of toys[1].
  • The product manual is a guidance document containing product-specific guidelines for certification. It incorporates “Grouping Guidelines” which allows certification to be granted for a group of toy models based on the testing of certain representative models.
  • These grouping guidelines have been framed based on the Indian Standard IS 9873 (Part 8):2019 which is identical with the International Standard ISO/TR 8124-8:2016 (Safety of Toys Part 8 Age Determination Guidelines) which classifies toys into 7 Categories and 146 Sub-Categories based on the appropriate starting age and the specific purpose or function of the toy.
  • For the purpose of certification, all the models of toys of similar design, made from the same materials and covered under a single sub-category, shall be considered as a series. A sample of any one model from each series shall be drawn and tested to cover all the models in that particular series.

Schemes Floated for the Toy Manufacturing Industry in India

Along with the set of existing and new compliances, the government has also introduced various schemes and incentives with the aim of promoting the industry.

Micro, Small, Medium Enterprises (MSME)

Approximately four thousand[2] enterprises in India, engaged in toy manufacturing fall under the category of micro and small-scale sectors. The MSMEs in the toy manufacturing sector is an unorganized sector, accounting for a whopping 60% of the national market share. These MSME’s are spread all across the country with a large chunk operating in the Northern and Western regions.

The Indian toy market is 70% larger thanks to the existence of MSMEs and the support they received from our government. In pursuance of the same, the government has amended the classification of MSMEs in the Aatmanirbhar Bharat Abhiyan to ensure that they receive the aid and recognition required to keep up with the changing times. The amended classification is as follows:

 

With the advent of Aatmanirbhar Bharat Abhiyan various schemes have been introduced to promote MSMEs:

•       Technology and Quality Upgradation Scheme

Enrolling in this scheme will help the micro, small and medium enterprises to use energy-efficient technologies (EETs) in manufacturing units to diminish the expense of production and adopt a clean development mechanism. The scheme guarantees to cover up to 75% of the expenditure.[1]

•       Grievance Monitoring System:

Enrolling in this scheme is advantageous when it comes to addressing complaints of business owners. Additionally, the owners may also check the status of their complaints and file an appeal if they are not satisfied with the result.

•       Incubation: 

It assists innovators in implementing their new design or product ideas. It provides financial assistance for “Business Incubators”. Financial assistance of 75 % to 85 % of the project cost, up to a maximum of 8.00 Lakh is extended to the innovators.[2]

•       Credit Linked Capital Subsidy Scheme:

Under this scheme, new technology is provided to the business owners to replace their old and obsolete technology. A capital subsidy is given to the business to upgrade and have better means to do their business. These small, micro and medium enterprises can directly approach the banks for these subsidies. The ceiling on subsidy would be Rs. 15 lakh or 15 per cent of the investment in eligible plant and machinery, whichever is lower[3]

•       Scheme of Fund for Regeneration of Traditional Industries: 

The government aims at establishing a total of 35 toy clusters in various states under this scheme. Once set up, these will boost the manufacturing of toys made of wood, lilac, palm leaves, bamboo and fabric. This scheme offers incentives such as skill development, capacity building, e-commerce assistance to local industries.

•       Product Specific Industrial Cluster Development Programme: 

The programme aims to establish dedicated SEZ’s and customize them into self-sustaining ecosystems catering to export markets.

 

Incentives Provided to the Toy Manufacturing Industry in India

The Centre and State governments have implemented various incentives to promote the toy industry.

A. For Toy Manufacturing Entities

 

1.Hiked import duty:

The import duty on toys was raised from 20% to 60% [4]making it difficult for foreign companies to compete in our market as well as making Indian companies’ entry into the market easier.

2.Handicraft and GI Toys exempted from Quality Control Order[5]:

This allows any traditionally made toys by artisans registered with Development Commissioner (Handicrafts) to be exempted from the quality compliances newly introduced.

3.Custom Bonded Warehouse Scheme:

Central Board of Indirect Taxes and Customs (CBIC) has launched a new scheme expected to play a critical role in promoting investments in India and in enhancing the ease of doing business. According to this, the unit can import goods (both inputs and capital goods) under a customs duty deferment program.[6]

4.Export Promotion Capital Goods (EPCG) Scheme: 

Enables the import of capital goods (toys/ spare parts thereof) in the pre-production, production and post-production stage without the payment of customs duty.

5.Increase in BCD for Electronic Toys (under HSN 9503) from 5% to 15%[7]:

This will increase the expenditure incurred for foreign companies to sell products in India and thus help relax the competition for Indian manufacturers. An example of how these steps have been implemented and made into a reality is the Product-Specific Industrial Cluster Development Program. An initiative taken up by the Karnataka government in partnership with Aequs Infra, is a first-of-its-kind project aimed at promoting toy industries by dedicating 400 acres of self-sustained ecosystem including an SEZ to serve export markets and Domestic Tariff Area (DTA) through state-of-the-art industrial infrastructure and facilities. It has the potential to create 40,000 jobs in five years and attract over INR 5,000 crore in investments. [8]The toy cluster aims to capitalize on the presence of key elements essential for the sector’s growth like manpower, R&D and raw material.  It is also in a strategic position to cater to 50% of the domestic toy market needs, and has an efficient connectivity network with access to highways, ports, airports, and major cities.[9] This program was touted as a one-stop-shop solution catering to the needs of both large MNCs and small and medium enterprises.

6. Duty Drawback Scheme: 

The scheme was introduced to rebate duty chargeable on any imported materials or excisable materials used in the manufacture or processing of goods, manufactured in India and exported.

B. For MSME’s

Apart from extending financial aid as discussed above, the government initiatives for MSME’s are largely based on undertaking initiatives to promote homegrown toy manufacturers and boost domestic demand for indigenous and locally produced toys. Some of these initiatives are:

Phased Manufacturing Programme (PMP): 

The programme will make the assembly of toys cheaper than imports, offering benefits similar to the PMP for mobile phones introduced back in 2015. The government has offered tax reliefs and differential tariffs among other incentives for components and accessories to push local manufacturing.

Toy Labs: 

In a bid to promote traditional toys, the government has chalked out a plan to create toy labs – a national toy fair for innovative Indian themed toys. The Atal Tinkering Lab is one such toy lab to provide support for physical toys promoting learning and innovation. Additionally, due to literacy programmes like Sarv Siksha Abhiyan and the new education policy, toys nurturing innovation and creativity are in focus.

Involving various sectors:

The education ministry has been asked to include indigenous toys as a part of learning resource, under the new education policy. The IIT’s are set to be roped in to look into the technological aspect of toys, while the NIFT’s shall study the concept of toys and national values, by using non-hazardous materials. The Ministry of Science and Technology has been directed to explore how India’s indigenous games can be featured in the digital space. While the Ministry of culture will work on ‘Indian Toy Museum’.

Labour law reforms:

The Indian toy industry is labour intensive, the new labour law reforms have a significant impact on the ease of doing business, thereby providing a competitive advantage to the Indian toy industries.

The toy industry is one sector that contains a lot of untapped potentials. The compulsory BIS certification as per the Toys (Quality Control) Order, 2020, will ensure that the quality of toys is at par with international standards along with the strengthening of existing conditions of the market. These are significant steps in the right direction to ensure that the domestic markets pick up once the pandemic wanes. The domestic production and sales could catch up with exports and thus make sure that the future of this sector will not be as grim as in the past and will light up, once again.

References 

1 https://www.investindia.gov.in/sector/consumer-goods/toys-manufacturing

2 Koppal Toy Manufacturing Cluster; https://static.investindia.gov.in/s3fs-public/2021- 01/Koppal%20Toy%20Manufacturing%20Cluster%20-%20For%20International%20Investors.pdf

3 Ibid

4 Indian Toys Market: Industry Trends, Share, Size, Growth, Opportunity and Forecast 2021-2026, https://www.imarcgroup.com/indian-toys-market

5 https://bis.gov.in/wp-content/uploads/2020/03/Toy_QC_order.pdf

6 https://dipp.gov.in/sites/default/files/orderToy-26February2021_0.pdf

7 https://dipp.gov.in/sites/default/files/QC-AmendmentOrder-Toys-21December2020.pdf

8 https://bis.gov.in/wp-content/uploads/2020/09/toys-faqs-bilingual.pdf

9 https://bis.gov.in/wp-content/uploads/2020/08/safety-of-toy.pdf

10 Toy industries in India; https://www.ibef.org/indian-toys

11 Impact of Aatmanirbhar Bharat Abhiyan on MSMEs; https://cleartax.in/s/impact-aatmanirbhar-bharat- abhiyan-msmes/

12 https://msme.gov.in/3-technology-upgradation-and-quality- certification#:~:text=Technology%20and%20Quality%20Upgradation%20Support%20to%20MSMEs&text=50%

13 https://msme.gov.in/incubation25%20of%20actual%20expenditure%20subject,licenses%20from%20National%20%2F%20International%20bodies.

14 http://laghu-udyog.gov.in/schemes/sccredit.htm

15 Budget 2020: Govt hikes customs duty on toys, furniture, footwear products; https://www.financialexpress.com/budget/budget-2020-govt-hikes-customs-duty-on-toys-furniture-footwear- products/1848123/

16 Handicraft and GI Toys exempted from Quality Control Order; https://pib.gov.in/Pressreleaseshare.aspx?PRID=1680181

17CBIC and Customs launch scheme to attract investment and support Make in India programme; https://knnindia.co.in/news/newsdetails/sectors/cbic-and-customs-launch-scheme-to-attract-investment-and- support-make-in-india-programme

18 Union budget 2021; https://www.indiabudget.gov.in/doc/budget_speech.pdf

19 https://www.investindia.gov.in/sector/consumer-goods/toys-manufacturing

20 Koppal Toy Manufacturing Cluster; https://static.investindia.gov.in/s3fs-public/2021- 01/Koppal%20Toy%20Manufacturing%20Cluster%20-%20For%20International%20Investors.pdf

 

 

Image Credits: Photo by Nguyen Bui on Unsplash

The toy manufacturing industry is one sector that contains a lot of untapped potentials. The compulsory BIS certification as per the Toys (Quality Control) Order, 2020, will ensure that the quality of toys is at par with international standards along with the strengthening of existing conditions of the market.

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CIRP Timelines Under The IBC, Extensions And Exclusions Thereon

The Insolvency & Bankruptcy Code, 2016 (IBC) was introduced when insolvency resolution in India took around 4 years on average. Therefore, completing the resolution process within a fixed timeline was at the heart of the new framework. But the instances of delays still kept cropping up and the code has been amended continually to impose stricter time frames and ensure compliance.

The aim of this article is to analyze the timelines provided for the corporate insolvency resolution process (CIRP) under the IBC and the latest amendments thereon.

 

With reference to the timeline for completion of CIRP under IBC, please note that generally the CIRP shall be completed within 330 days from the Commencement of Insolvency Proceedings. However, it is subject to certain exclusions. 



The Relevant Provisions:

 

Section 12(2) of the IBC states that the Resolution Professional (RP) may file an application with National Company Law Tribunal (NCLT) to extend this 180-day period by a further 90 days if instructed to do so through a resolution passed by a vote of 66% of the voting shares of the Committee of Creditors (CoC).  This extension can be given only once. 

 

Section 12(3) of the IBC was amended by way of the Insolvency and Bankruptcy (Amendment) Act, 2019, and two provisos were added: 

 

Proviso 1 states that a CIRP must mandatorily be completed within 330 days from the insolvency commencement date, including any extension of the period of the CIRP granted and the time taken in legal proceedings in relation to the resolution process.

 

Proviso 2 states that, when the CIRP of a Corporate Debtor (CD) has been pending for over 330 days, it must be completed within 90 days from the date of the amendment. 

 

Thus, the overall timeline for completing a CIRP now stands at 330 days from the date of insolvency commencement date. However, it shall be noted that while calculating the number of 330 days the following shall be excluded. 

 

 

Exclusions to the Timelines:

 

Lockdown Period:

 

Pursuant to the Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016, CIRP timelines have been relaxed by virtue of the COVID-19 outbreak. The lockdown period, shall be excluded from computation of the time-line for any task that could not be completed due to such lockdown. The said 68 days has to be excluded for reckoning the timelines under the CIRP pursuant to the following dates of nationwide lockdown: 

  • Phase 1: 25 March 2020 – 14 April 2020 (21 days) 
  • Phase 2: 15 April 2020 – 3 May 2020 (19 days) 
  • Phase 3: 4 May 2020 – 17 May 2020 (14 days) 
  • Phase 4: 18 May 2020 – 31 May 2020 (14 days) 

Period of Stay:

 

The Hon’ble NCLAT, in case of Quinn Logistics India Pvt Ltd, Vs. Mark Soft Tech Pvt. Ltd. has laid down the principle that the period of stay shall be excluded, if the CIRP is set aside by the Appellate Tribunal or order of the Appellate Tribunal is reversed by the Hon’ble Supreme Court, and corporate insolvency resolution process is restored. Therefore, the period of stay shall be excluded while reckoning the 330 days.




Extension of the Timelines:

 

In Committee of Creditors of Essar Steel India Limited Vs. Satish Kumar Gupta & Ors., it was held that on the facts of a given case, if it can be shown to the Appellate Authority (AA) and/or the NCLAT that only a short period is needed beyond the 330 days to complete the CIRP and that it would be in the interest of all stakeholders for the CD to be put back on its feet instead of being liquidated; and further that the time taken in legal proceedings was largely due to factors that could not be ascribed to the litigants before the AA and/or the NCLAT, the delay or a large part thereof being attributable to the tardy process of the AA and/or the NCLAT itself, the AA and/ or the NCLAT may extend the time beyond 330 days.

 

                                                             

Conclusion:

 

Even under the newly added provisos to section 12, if for all these factors the grace period of 90 days from the date of commencement of the amending act of 2019 is exceeded, discretion can be exercised by the AA and/or the NCLAT to further extend the time, keeping the aforesaid parameters in mind.

 

Overlapping timelines, multiple interpretation, and resultant litigation is still causing delays in the resolution process and might continue for some more time until ambiguities are conclusively resolved through judicial analysis.

 

Image Credits:  Photo by Melinda Gimpel on Unsplash

Even under the newly added provisos to section 12, if for all these factors the grace period of 90 days from the date of commencement of the amending act of 2019 is exceeded, discretion can be exercised by the AA and/or the NCLAT to further extend the time, keeping the aforesaid parameters in mind.

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