Designers and Retailers Fret over Mandatory 10% Excise Duty on Branded Clothes

To protest against this imposition of tax and demanding a reversal of the decision, as much as 10,000 stores, including Shoppers Stop, Pantaloons, Westside, Lifestyle, Madura Garments and Arvind Brands, went on a one-day strike across Delhi and Mumbai.

Pranab Mukherjee's Union Budget may have put a smile on the face of many but the branded apparel sector is an unhappy lot. Disappointed over the introduction of 10% excise duty on branded apparels, the industry is demanding a roll back on the same. To protest the hike in the excise rate, retailers held a nationwide strike of apparel stores. The mutual feeling amongst fashion designers, retailers, stores, and textile associations is that this recent addition of excise tax will serve as a setback to the industry, which is already hit badly by the increasing prices of raw material.

According to Kumar Rajagopalan, CEO, Retailers Association of India (RAI), about 50,000 apparel brands will be impacted by this additional tax. He says, "Out of a total of an estimated 1,00,000 crore apparel business in India annually, 60,000 crore is generated from branded apparels."

Fashion designers are already fretting over their sales getting affected adversely. Designer Leena Singh termed the recent development as criminal. She says, "Despite the popular perception, we designers don't have deep pockets." She says, "There is a lot of hard work involved on the part of technicians and craftsmen who work with fashion brands. We are already paying so much from our own pocket. VAT, Sales Tax, Income Tax and store rent and this additional excise tax will kill the business of many designers. Some big names in the industry might still survive this, but the mid-segment and junior designers will be wiped out completely, as they will be struggling to make ends meet."

Fashion Design Council of India (FDCI) is planning to file a petition to the Finance Minister to roll back the excise duty. Sunil Sethi, President, FDCI, says, "We had a meeting to discuss this issue where almost 50 people were present, including Rohit Bal, Anju Modi, Manav Gangwani, Poonam Bhagat, along with a few lawyers and experts. We discussed how would this affect us, and how we can take this forward and present our case to the Government." Sethi also added, "A designer is promoting craft and the work is almost always craft-based rather than assembly line. By that logic, we are craftsmen and not liable to pay excise tax."

Kalyani Saha, VP, Christian Dior, feels that the burden of excise duty will lead to price rise and will hit the consumer. She says, "The consumer will be hit and that is not a good sign, when the Indian fashion industry is finally getting recognition internationally.

Arjun, of the designer duo Anjalee-Arjun, says that shifting the price increase to the consumers will backfire as they will shift to other markets. "The fashion designers ultimately will have to bear this price hike or else this price rise will result in consumers not buying designer outfits. As it is, bulk buyers are going to Malaysia, Thailand and China to buy clothes. This move will further deter them from buying in India," says the designer.