Duty benefits for man-made fibres to be increased

There's more good news for exporters of man-made fibres. The government will soon increase the rates under the Duty Entitlement Passbook (DEPB) scheme for man-made fibres.

The revised rates are expected to be notified soon, particularly since the textile sector will be facing a quota-free regime from January 1, 2005.

The finance ministry had agreed to the textile ministry's proposal to revise the rates for man-made fibres as they had been adversely affected by the 45 per cent across-the-board cut in DEPB rates in September this year, a ministry official told Business Standard.

The man-made fibres industry has been seeking a revision in the DEPB rates since the man-made sector still attracts mandatory excise duty of 24 per cent on Polyester Filament Yarn, including textured yarn, and 16 per cent on all other filament yarn and man-made fibres. The government had introduced a zero excise duty regime for cotton in the Budget.

Despite this, the DEPB benefits on all 82 textile products covered under the scheme was reduced by 45 per cent, overruling the textiles ministry's proposal that the cut should not be more than 30 per cent as the textile sector will be facing a quota-free regime from January 1, 2005.

"The revised list will factor in the excise duty reduction given to cotton and the lesser reduction for man-made fibres. The revised rates should be notified soon," the official said.

The DEPB is a reimbursement of basic and special Customs duty paid by an exporter on an imported input used in the export product. The benefit is given by way of a grant of duty credit against the export product at specified rates.

Following the sharp reduction in DEPB rates for textiles, the outgo on account of the DEBP benefit in textiles has been reduced to Rs 1,500 crore in this fiscal as against Rs 3,387 crore in 2003-04.

Finance Minister P Chidambaram had recently stated in Parliament that the duty structure of man-made fibres would be addressed in the forthcoming Budget to address anomalies vis-a-vis the cotton sector.

Textiles ministry officials said that matter was being favourably considered. "There is a case for continuation of fiscal reforms particularly with regard to man-made textiles," an official said, adding the ministry would soon forward its recommendations to the finance ministry.