The textiles ministry favours reducing the excise duty on man-made fibre and yarn to a uniform rate of 8 per cent in the next year's Budget. The ministry will soon forward its recommendations to the finance ministry. |
The move is aimed at reducing the discrepancy in the duty structure between cotton and man-made fibres on account of the excise exemption granted to cotton in this year's Budget. |
Finance Minister P Chidambaram had, earlier this week, stated in Parliament that the duty structure of man-made fibres would be taken up in the Budget. |
While cotton, silk and wool are exempt from excise, man-made staple fibre attracts an excise of 16 per cent, while polyester filament yarn (including texturised yarn) attracts a duty of 24 per cent. All other man-made yarn, including textured yarn, have 16 per cent excise duty. |
Senior government officials said the textiles ministry had also formally written to the ministry of small scale industries to de-reserve 26 items pertaining to knitwear and knitwear fabric. |
Garments have already been de-reserved from the SSI list while the investment limit for knitwear had been increased to Rs 5 crore. |
The Cabinet had yesterday also approved changes to the Technology Upgradation Fund scheme (TUFS) under which the government will provide capital subsidy to specified machinery in the processing sector in addition to an interest subsidy of 5 per cent. The capital subsidy is expected to cost the government between Rs 175-200 crore over the next two years. |
The capital subsidy will be equal to the net present value of a 3 per cent interest subsidy. The textiles ministry had proposed raising the interest subsidy under TUFS to 8 per cent from 5 per cent at present. However, the Cabinet decided to grant a capital subsidy equal to a 3 per cent interest subsidy, officials said. |
Officials said the benefit would be available for 17 specified machinery in knit processing and 23 machinery in woven fabric processing. Further, the benefit would be extended for a limited period of six months. |