Branded garments will become cheaper despite hike in its excise duty as a result of the government raising the abatement from 55% to 70% under the budgetary proposals for 2012-13.
This would mean the levy would not be imposed on 70% of the cost of the product as against the present exemption of 55%.
Thereby the effective excise duty would stand reduced to 3.6% from 4.5%.
While presenting the Budget 2012-13, Finance Minister Pranab Mukherjee proposed to enhance the excise duty on branded apparel to 12% from 10% at present.
"Along with increase in duty to 12%, I propose to enhance the abatement to 70%. As a result, the incidence of duty as a percentage of the retail sale price would come down from 4.5% to 3.6%," Mukherjee said.
Apparel Export Promotion Council Chairman A Sakthivel said: "The increase in the duty rate from 10% to 12% will adversely impact raw-material costs."
Meanwhile, for promotion of technology especially in the weaving sector, Mukherjee proposed to fully exempt automatic shuttleless looms from basic customs duty of 5%.
"Similarly, full exemption from basic duty is being accorded to automatic silk reeling and processing machinery as well as its parts," he said.
Further, Mukherjee proposed to restrict these exemptions and the existing concessional rate of basic customs duty of 5% only to new textile machinery. Also, second-hand machinery would now attract basic duty of 7.5%.
Reacting on the announcement, Textiles Minister Anand Sharma said, "The move will have a significant impact on value-addition, upgradation and job creation. To some extent, the Finance Minister has accommodated the request of textiles industry."
Further, Mukherjee said, the basic customs duty on wool waste and wool tops would be reduced to 5% from 15%, currently.
Also, it was proposed to reduce basic customs duty on titanium dioxide to 7.5% from 10%.