Recycled polyester staple fibre (PSF) manufacturers may soon get relief from the payment of excise duty, as the finance ministry is likely to withdraw its decision to include it in the category of textile fibres.
Official sources said the exemption would be granted only if PSF was recycled from plastic waste, and not plastic.
The 2012-13 Budget stated the rate of excise duty on recycled PSF be pegged at 10 per cent, in line with other textile fibres such as polyester fibre and yarns and its raw material, purified terephthelic acid and mono ethylene glycol.
In fact, the Budget chose to make the above amendment with retrospective effect from June 29, 2010. According to the proposal, duty in respect of clearances already made is to be recovered from the manufacturers of these goods within a month of the date of enactment of the Finance Bill, 2012, otherwise it would attract an interest penalty of 24 per cent. Simultaneously, the manufacturers are being permitted to take into account credit of duty paid on inputs, input services and capital goods.
Recycled PSF is a man-made fibre as polyester staple fibre and polyester filament yarn. This is manufactured either from plastic or plastic waste, including waste polyethylene terephthalate bottles. The Budget had proposed man-made fibre to be included in the list and taxed as textile fibres.
Market sources said Reliance Industries and Ganesha Ecosphere (the erstwhile Ganesh Polytex) were two major players in the Indian re-cycled PSF business from PET bottle waste or plastic waste.
Prior to the Budget proposal of 2012-13, recycled PSF was exempted from excise duty. When it was introduced in 2011-12, some companies had gone into legal disputes, and thus, companies did not pay excise duty pending a judgment. Therefore, the government chose to come out with a retrospective amendment to enforce the duty with interest penalty.
According to industry sources, the duty structure on man-made fibre distorts, and thus, favours cotton-made or natural fibre from technical textile fibre.
While polyester, viscose, nylon and polypropylene account for 70 per cent of the total fibre used in technical textiles, specialty fibres of upgraded variety comprise the remaining 30 per cent.
