10 percent excise duty to hit garment sector: CITI

Top Stories

»	49% Indian startups now from tier 2, 3 cities: Jitendra Singh
»	'India ranks 3rd in global startup ecosystem & number of unicorns'
»	Tripura exported over 9K tonnes of pineapples in 2 years
»	CPI inflation eases to 6.71% in July, IIP falls to 12.3%
»	Rupee depreciates 12 paise to close at 79.64 against US dollar

Namrata Kath Hazarika | 01 Mar, 2011
The Indian textile and clothing industry will be adversely impacted by the mandatory excise duty of 10 percent as proposed in the Budget, said Confederation of Indian Textile Industry (CITI) Chairman Shishir Jaipuria.

"The mandatory excise duty of 10 percent imposed on branded readymade garments and made-ups would not only have serious adverse impact to these highly labour intensive segments but would also have significant operational problems at the level of implementation." Jaipuria stated in a statement issued on Monday.

Readymade garments and made-up textiles are currently under optional excise duty regime. But Finance Minister Pranab Mukherjee in his budget speech on Monday proposed mandatory imposition of 10 percent duty on this segment.

The CITI chief also pointed out that since most of the inputs for these segments would be coming through optional excise duty regime, there will be very little duty credit to be utilized for payment of excise duty by them.

Also, most of the branded readymade garment production in India is outside the SSI segment and therefore SSI exemption will not be of much help. This duty coupled with the SSI exemption has the potential to further fragment the readymade garments and made-ups industries, Jaipuria added.

The government needs to restore the optional excise duty regime for both branded readymade garments and branded made-ups, he urged.

Reacting on the the move, Premal Udani, Chairman of Apparel Export Promotion Council (AEPC) said that with this announcement, henceforth, the branded apparel manufacturers will be hit hard as they have to mandatorily pay the excise duty of 10 percent.

"With this new regime, the garment exporting units in Tamil Nadu and West Bengal will be badly hit. Tamil Nadu, as a whole, provides around one fourth of Indiaâs garment exports. Given the complex value chain, it is requested that garment export industry should be provided with optional excise duty regime as given earlier to protect large number of units," he added.

He also added, though CENVAT credit of inputs and services would be available and exports would continue to be zero rated, the factories have to register themselves with central excise, increasing the net transaction and administrative costs.

This will severely impact industries with higher requirements of outsourced processing and other services like the knitwear industries, embroidered or other value added garments, Udani further said.

The industry, which has been reeling under high-cost of raw materials like cotton, feels the move would force them to increase the retail price by 10-15 percent.

While, the textile industry welcomed the move on extending Rs.3000 crore to NABARD in phases for handloom cooperative societies which will be helpful to a large number of handloom weavers once the Scheme is finalized and announced by the Ministry of Textiles.

CITI opined that the reduction of customs duty from 7.5 percent to 5 percent on certain textile intermediates and inputs for technical textiles will be of some help to the nascent and potential technical textiles.

Referring to the increase in excise duty for yarn and fabrics from 4 percent to 5 percent, Jaipuria felt that since the optional regime continues to be applicable, this would not have any major impact on the industry.

The reduction of excise duty on 40 specified textile machinery (List 2 of Notification NO.6/2011-CE) from 10 to 5 percent has been welcomed as well but that the impact of this reduction will be limited, since most of these machines are not manufactured in India, he added.

He added that imposition of 5 percent excise duty on automatic looms and projectile looms would add an avoidable duty burden on the machinery industry which will impact fabric manufacturers, including the decentralized powerlooms.

The provision of around Rs.3,000 crore for TUFS in the budget is a good move by the government but requested the government to resume fresh sanctions under the Scheme at the earliest, since these have been under suspension for a long time now, the CITI Chairman further added.