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Pre-Budget memorandum for 2007-08

Feb '07
The textile and clothing (T&C) industry of India is performing very well in the domestic and international markets. The industry has invested substantially in modernization and capacity building during the last couple of years and the positive impact of such investments is discernible in the current growth in capacity utilization and exports by the industry.

Positive policy inputs from Government, especially rationalisation of excise and customs duty structure and removal of SSI reservations, have played a crucial role in this growth.

There are a few more measures required on the part of the Government in order to help the textile and clothing industry to achieve its immense potential for contributing to the economy in terms of industrial production, employment and exports. We are listing below the major points that require your immediate and kind attention.

Excise Duty:
a). Currently, the textile value chain from yarn to garments attracts excise duty at the rates of 4% for products from natural fibres and 8% for products from manmade fibres. The industry has the option of paying excise duty at the stipulated rate and claiming cenvat on the inputs or not paying excise duty. We would request that this option may be retained and the excise duty on manmade fibre products may be reduced to 4%, in order to make the rate fibre neutral.

b). Manmade fibres currently attract excise duty at the rate of 8%. Polypropylene chips attract 16% duty. Since most manufacturers have opted for zero duty for textile products, they are not able to take cenvat credit for these duties. We would request that excise duty on manmade fibres and polypropylene chips be reduced to 4%, at par with the recommended yarn duty.

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