In the Union Budget 2016-17 presented in Parliament today, the finance minister proposed to increase the excise duty on branded readymade garments and made up articles of textiles of retail sale price of Rs 1,000 or more from nil to 2 per cent (without CENVAT credit) or from 6 per cent/12.5 per cent to 12.5 per cent (with CENVAT credit).
“The imposition (of the duty) is all the more surprising when the finance minister rightly emphasized in his speech the importance of job creation and the 'Make in India' thrust. Textile is the highest employer after agriculture, and hence it is indeed ironical that new taxes are being levied on such an industry,” said CMAI president Rahul Mehta in a statement.
The apparel industry is going through a rough patch, with the onslaught of online companies with their high discounting, and the somewhat sluggish sentiments of the market. In such a situation, the imposition of duty will worsen the situation, said Mehta.
He recalled that introduction of duty on finished products, while sustaining the exemption for upstream products, was an experiment implemented a few years back by the previous government and withdrawn subsequently when the disastrous consequences were understood. “Repeating that experiment is the last thing the industry needed, especially when the entire textiles and clothing industry in the country is already going through a crisis because of demand recession both in the domestic and export markets.”
He pointed out that the very task of collecting the duty from the highly dispersed and mostly tiny units in the garment sector would be a formidable one for the government, especially when the rest of the value chain remains exempted and therefore traceability will be a serious issue. The large number of small and tiny units in the sector will also find it impossible to follow the procedures involved. The result will be that evaders will prosper and compliant units will suffer. He added that the revenue for government from this decision will be negligible, whereas the problems that it would create for the industry will be huge.
It is also crucial to note here that a lot of exporters are hoping to offset their slowdown in global markets by making an entry in the domestic sector. The efforts of these exporters would again hit a roadblock due to the imposition of the duty, Mehta felt. (RKS)
Fibre2Fashion News Desk – India
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