Prices of readymade garments may go up following the finance minister’s proposal to make excise duty of 10 per cent mandatory on readymade garments, dresses bearing a brand name or sold under a brand name.
Non-branded garments makers will get excise duty exemption if they have not availed facility of duty credit on inputs. This facility, hitherto available to branded garment makers, has been withdrawn. Also merchant garment makers who get the manufacturing done on job work bases and sell them under their brand name will have to pay excise duty.
President of Clothing Manufacturers’ Association of India Rahul Mehta said this would have a negative impact and the association would approach the finance ministry for a review.
President of Mumbai unit of Textile Association of India C Bose said, “The mandatory excise duty on branded garment was expected since it would discipline the market and remove the scope of arbitrary and imperfect pricing of the readymade garments. This should have a negative impact as this has value additions, which is almost 500 times the value of the raw material and the end user is usually the high income group.” He was, however, disappointed as the budget did not spell out anything on continuing the technology upgradation fund (TUF) even though the textile ministry had recommended it.
The sector, however, received a slew of benefits, from reduction of custom duty on various chemicals used for manufacturing of synthetic textile to reduction of excise duty on textile machinery. Also, basic customs duty on raw silk of all grades has been cut from 30 per cent to five per cent and specific tariff rate of excise duty of 10 per cent has been prescribed for jute yearn, while it was exempted from excise duty. Textile items have been exempt from additional duties of excise under Goods of Special Importance Act, 1957.
“While there has been no major negative for the textile industry which is sign of relief, the benefits in terms of customs duty reduction for imports of certain raw material may not matter much since their prices are increasing across the globe,” said Sunil Khandelwal, CFO, Alok Industries.
“Textile machinery costs may go down with excise duty halved from 10 per cent to five per cent on parts of specific textile machinery, which includes 40 items in list six of excise notification. Besides, full exemption is being granted to specified part of sewing machines other than those with in built motors. This is a big boost for the textile machinery sector,” said S Chakraborty, secretary general, textile machinery manufacturers association.