The Clothing Manufacturers Association of India (CMAI) has urged the Indian Government to continue excise duty exemption on branded garments for the healthy growth of the organized sector.
In a representation sent to Union Finance Minister Arun Jaitley and Minister of State for Textiles Santosh Kumar Gangwar, CMAI president Rahul Mehta said if the Government brings back compulsory excise duty on branded garments, it will create disastrous impact on apparel industry and it will help grey market.
Mr. Mehta, who is also vice chairman of International Apparel Federation (IAF), said the definition of a “Brand” under Excise Laws 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, excise will be levied on all garments, and not merely on those meant for the rich and well-off, and urged the Textiles Ministry to take a firm stand on this issue and ensure that the move to bring back compulsory excise duty on branded garments is not implemented by the Government.
According to Mr. Mehta, 80 percent of the Indian apparel industry is still in the small scale sector, and imposition of excise duty would become a major deterrent to the survival and growth of the small manufacturers.
Whenever the Government has introduced excise duty on garments in the past, a shift to the grey market has been observed, with the Government losing out even on the other forms of taxes such as Income Tax, VAT, etc.
Nearly 50 percent of a brand’s annual sales are made at Discounted Rates, ranging from 30% to 70%. However, Excise Duty, which is 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 than the intended levels, feels Mr. Mehta.
He argues that the current exemption from excise duty provides a huge incentive for many international brands to source their garments from Indian manufactures. But, this advantage will be wiped out once compulsory excise duty is introduced, as global apparel brands would prefer to import their requirements rather than manufacture in India.
The Indian clothing industry has moved to an investment phase after a hiatus of 3-4 years, and levying of excise duty would once again put a brake on such plans, the CMAI statement said.