The government's move to provide partial relief in excise duty on branded garments' in the Budget will help improve profitability, retailers and manufacturers today said but ruled out immediate price cuts.
"The latest change in the Budget is a small one though, but it will provide a certain amount relief in terms of stability of product prices," ITC Lifestyle Retailing Chief Executive Atul Chand told PTI.
There might also be some price reduction over a period of time but not immediately, he added.
Finance Minister Pranab Mukherjee has raised abatement on branded garments from 55% to 70% thereby bringing down the effective excise to 3.6% from 4.5% earlier.
He has announced increasing the overall excise duty rate to 12% from 10% earlier.
Manufacturers also expressed similar views that it is too little for the garments industry that has been under pressure due to several reasons, including the excise duty, high cotton prices and over all slowdown.
"Such a small difference is unlikely to translate into reduction of prices, but it will help bottomlines of manufacturers," Clothing Manufacturers Association of India (CMAI) President Rahul Mehta.
Without specifying when and how much will retailers pass on the benefit of reduced excise to consumers, Future Group CEO Kishore Biyani said: "Increase in abatement on the excise duty for branded ready-made garments is a welcome step. It will benefit the apparel industry and help reducing prices and in turn increasing consumption."
According to DLF Brands Chief Executive Officer Dipak Agarwal, the cost of importing garments is also very high in India.
"Branded garments in India attract very high duties, which in-turn makes it difficult for companies to pass the cost on to the consumers. High prices also adversely impact demand and volumes," he said.
Agarwal said in the last 4-5 years, duties on imported branded garments have gone up from 15% to around 30-35%.
CMAI, which had last year vehemently opposed the move to impose 10% for the first time in 2011-12 Budget, along with industry associations and retailers said even this time around the sector's demand has not been met.
"It is disappointing that request to roll back the excise on branded garments was not considered. However, if we look in isolation, the Finance Minister has definitely given some relief as effectively the tax would come down by 0.9%," Mehta said.