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Mixed bag for textile sector in union budget

March 1, 2011 (India)

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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