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Mixed bag for textile sector in union budget

01 Mar '11
4 min read

The Finance Minister, Pranab Mukherjee has been benevolent as well malevolent to the Indian textile industry in the Union Budget 2011-12 unveiled in Parliament yesterday. He has reduced or removed customs duties on a wide range of textile raw materials.

However, excise duties too have been increased. Branded clothing could get costlier as he has imposed a 10% excise duty on them as well as increased the concessional central excise duty on a wide range of goods to 5%, though cotton sector will continue to remain in the 4% Cenvat bracket.

The Finance Minister has proposed to provide Rs. 30 billion to NABARD, which will benefit 15,000 cooperative societies and about 300,000 handloom weavers.
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Duty Revisions at a glance -

Customs Duty:
- Basic customs duty on raw silk (not thrown) reduced from 30 to 5 per cent.
- Basic customs duty on Rayon Grade wood pulp (raw material for Viscose fiber) has been reduced from 5% to 2.5%.
- Basic customs duty on Acrylonitrile which is raw material for Acrylic fiber is being reduced from 5% to 2.5%.
- Basic customs duty on Caprolactam (raw material for Nylon chips and yarn) and nylon chips are being reduced from 10% to 7.5 %. Customs duty on Nylon Yarn and fiber is also proposed to reduce from 10% to 7.5%.
- Basic customs duty on Diphenylmethane 4, 4-di-isocyanate (MDI) and
- Polytetrametylene ether glycol (PT MEG) are being reduced from 7.5% to 5% subject to actual user condition. Both these chemicals are raw materials for Spandex yarns.
- Basic customs duty on cotton waste is being reduced from 10% to nil.
- The list of specified goods, allowed to be imported duty free for use in the manufacture of textile and leather garments, has been expanded by including anti-theft devices like labels, tags and sensors etc.
- Duty free import permitted for trimmings, embellishments, components etc. against exports of leather, footwear and textile garments by merchant exporters subject to certain conditions.

Excise Duty:
- The Concessional central excise duty rate of 4% is being increased to 5% and thus all goods currently attracting 4% duty will now attract 5%. However, cotton sector to continue to remain in the 4% cenvat bracket.
- The optional scheme for payment of excise duty on readymade garments and textile made up, which bear a brand name or are sold under a brand name would no longer be available. An excise duty @10% is being imposed on such goods without Cenvat credit facility.
- The general SSI exemption has been extended to such goods.
- The tariff value for charging duty on readymade garments and textile made-ups would be @ 60% of the retail sale price.
- Excise duty has been reduced on parts of 40 specified Textile machinery and equipments (List 2 of Notification No. 6/2006-CE dated 01.03.2006) from 10% to 5%.
- Excise duty of 5% has been imposed on automatic looms and projectile looms.
- A tariff rate of 10% is being prescribed on Jute yarn falling under tariff items 53071010 and 53072000 while simultaneously exempting them from Central Excise Duty.

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