Sports goods industry seeks withdrawal of excise duty

Mainly small-scale in nature, manufacturers were earlier exempt from excise

Perturbed over flat growth in the domestic market for the second consecutive year, sports goods manufacturers, a majority of which are in the micro, small and medium enterprises (MSME) sector, want a withdrawal of excise duty on the lines of that granted to the ready-made garments industry. Finance Minister P Chidambaram had exempted ready-made garments from excise duty in the recent Budget.

Pran Chadha, managing director of Jalandhar-based Universal Sports Industries, told Business Standard: "Our sales in the domestic market have been flat over the last two years, due to the imposition of excise duty in the 2011-12 Budget. So, in order to give the industry a boost, the government must exempt it from the ambit of excise duty. In this regard, we met the Union MSME secretary, the Union revenue secretary, and also Union Law Minister Ashwani Kumar, and apprised them of the current scenario." Chadha is a member of the Sports Goods Manufacturers & Exporters Association.

He added that earlier, there was no excise duty on sports goods - the industry enjoyed exemption, being a small-scale industry. But on March 1, 2011, excise duty of one per cent was levied on about 130 items. Further, in the 2012 Budget, it was arbitrarily increased to two per cent. Excise is applicable to only those units that are engaged in domestic sales, not on exports.

"Our industry is very small, with about 450-500 units registered as MSMEs and around 4,000 tiny cottage units as unregistered and scattered in villages around Jalandhar (Punjab) and Meerut (Uttar Pradesh)," said Chadha. "Also, only about 40 units are registered in Meerut and Jalandhar under excise (other units do not come under the ambit of excise, as their turnover is less than Rs 1.5 crore) and provide excise revenue of Rs 18-20 crore."

Since the Central government has already granted excise duty exemption to the apparel industry in the recent Budget, foregoing a huge amount of revenue, withdrawing the excise duty on sports goods would not impact its revenues much, he argued.

Jalandhar and Meerut contribute 85-90 per cent of the total sports good exports from India. Last year, the quantum of exports from Jalandhar and Meerut was Rs 700 crore, and the contribution of the domestic market was around Rs 1,500 crore. The products manufactured are soccer balls, cricket bats, hockey and cricket balls, hockey sticks, racquets for tennis, badminton and squash, tennis and squash balls, soft leather goods, and shuttle cocks.

Besides, the decision of Adidas, the German sportswear maker, to shut down one-third of its Reebok stores across India, combined with a decline in sports goods outsourcing from Indian manufacturers by other global brands like Puma and Slazenger owing to tepid demand, has also affected the industry. The majority of the industry here supplies sports goods to global brands like Webb Ellis, Reebok, Puma and Slazenger. Besides catering to multinational companies' demands, some manufacturers also cater to the domestic market under their own brand name.