Continue excise duty exemption on branded garments: CMAI

The Clothing Manufacturers Association of India (CMAI) today urged the government to continue excise duty exemption on branded garments for the healthy growth of the organised sector.
"We have urged the government to continue excise duty exemption on branded garments for healthy growth of the organised sector. If government brings back compulsory excise duty on branded garments, it will have disastrous impact on the industry and will help the grey market," CMAI President Rahul Mehta said in a statement here.
The CMAI said the government should consider the definition of a "Brand" under excise laws, which includes any garment, which has a name, or logo, or symbol or any other identification mark on the product or package.

Since all garments are sold with some label or the other, it is important to note that excise will be levied on all garments and not only on the high-end brands, it said.
Since 80 per cent of the industry is still in the small scale sector, this move will be a major deterrent to the survival and growth of these small manufacturers, Mehta said.
Whenever excise has been introduced, a shift to the grey market has been observed, with the government losing out even on other forms of taxes such as income tax, VAT, etc, he said.
Mehta pointed out that the assumed loss of Rs 1,200 crore in excise (due to exemption) is a misconception, as the industry is currently not getting CENVAT (Central Value Added Tax) benefits.

However, if excise is made compulsory, manufacturers will also be entitled to take CENVAT credit, which will reduce the net collection to hardly Rs 300 from Rs 350 crore.