Textile firms flock to other states for duty exemption

A number of textile mills are looking to set up units in backward areas of Himachal Pradesh, Jammu and Kashmir, Uttaranchal and northeastern states as raw cotton is exempted from excise duty there.

Major textile mills are unhappy over this. Textile mills are expected to make a representation before the central government, demanding that the apparel sector be covered under excise duty even in backward areas of these states so that those attempting to set up mills there cannot enjoy an "undue" advantage over the rest.

Textile mills moving out of Gujarat will get a nine per cent reduction in excise duty and sales tax on cotton even before they begin processing.

On a garment costing Rs 1,000, these companies which are looking to shift to such backward areas, will directly gain an advantage of around Rs 90 on a single garment.

"A number of textile mills are attempting to set up units in the backward areas of Jammu and Kashmir, Uttaranchal, Himachal Pradesh and some northeastern states. As cotton is exempted from excise and sales tax in these areas, such units will have an undue advantage over those existing in non-backward areas," said Sanjay Lalbhai, managing director of the Arvind Mills Ltd, a member of the Lalbhai group.

He said textile mills are objecting to this trend of units moving to such areas and will make a representation in this regard to the central government.

"We will make a request that at least the garment and apparel sector be included in excise and customs even in the backward areas of these states," he said.

Kashmir, Uttaranchal, Himachal Pradesh and some northeastern states have declared certain backward pockets where no excise and sales tax will be applicable for a fixed period for companies which set up units there.

Although Lalbhai did not name any company, he said several textile companies were looking to take advantage of these tax sops.

Naishad Parikh, former chairman, CII Gujarat council, said while this policy of tax sops in backward areas does encourage the industry as a whole, it impacts the textile industry in a big way.

"At a time when production costs are high, those industries which set up units in such backward areas gain a distinct and unfair advantage over the others," he said.

Others issues that the textile industry will take up with the central government is more flexible labour policies not only in the SEZs but also in government-run apparel parks.

Also, the industry is demanding a uniform framework of power rates for the textile industry as different states have different tariffs, which does not provide a level-playing field for all.