Ministry against return to excise on branded garments

The Union ministry of textiles is reportedly opposing the idea of bringing back the excise duty on branded garments, reportedly being considered by the ministry of finance.

A 10 per cent excise duty on branded garments was levied in Budget 2010-11 by then finance minister Pranab Mukherjee. He increased it to 12 per cent in Budget 2012-13, with 70 per cent abatement. But his successor, P Chidambaram, removed the levy in Budget 2013-14, to help this industry, hit by a slowdown and currency volatility. As a result, the exchequer took a hit of Rs 1,300 crore.

Rahul Mehta, president, Clothing Manufacturers Association of India, said: “Since 70 per cent of the industry is in the small scale sector, this move will be a major deterrent to their survival and growth.”

Of the domestic textile apparel market size of Rs 250,000 crore, the total organised sector is Rs 75,000 crore, of which the ready to wear (garment) market is Rs 45,000 crore. There are 90,000 manufacturing units (10 machines and above) in the country.

For many international brands, the current exemption from excise duty provides a big incentive to raise sourcing from Indian manufacturers. “Last budget, the government removed the excise duty on branded garments and that should be continued. In fact, the government should create more job opportunities in the apparel space and help modernise the sector to make India a global sourcing destination,” said Rakesh Biyani, joint managing director, Future Retail.

The timing is also not right for increasing any burden on the garmenting.

“It has been seen that the industry has moved to an investment phase after a hiatus of three-four years, and this move will once again put a brake on such plans,” said Mehta.  

In its representation to the ministry of textiles, CMAI has said, “Nearly 50 per cent of a brand’s annual sales are made at discounted rates, of 30-70 per cent. However, excise duty, levied at the time of dispatch from the factory, is calculated on the full price. Therefore, the burden of excise on the consumer is nearly twice intended level.”