With textile and apparel associations across India carrying out mass protests against the Union budget’s mandatory central excise for branded readymade garments, the government has decided that this sector will be eligible for taxes paid on inputs.
Although the government is not ready to relent on the tax, it feels that manufacturers can avail of cenvat credit which means all taxes on inputs for branded apparels. The finance ministry is expected to make an announcement clarifying these details soon. The levy of an excise duty on readymade garments and textile made ups bearing a brand name or sold under a brand name has been considered by industry experts to be exorbitant and unfair on the common man. However, the cenvat credit is expected to ease the situation a bit.
“Any small scale unit having a turnover of less than Rs 1.5 crores is exempt from excise duty, but at the same time will not be allowed to claim cenvat credit. The duty is to be charged only on the 60 per cent of the tariff value of the retail price, which provides adequate relief. The optional duty regime enjoyed by the sector prior to the Budget would also continue, but branded garment makers will not be able to avail of the scheme,” says a government official.
Although readymade garments and made-up articles were exempt from excise duty, they also have an optional scheme in case they wanted to avail credit for input taxes. Under this regime they had to pay duty at the rate of 4 per cent for goods made of only cotton and 10 per cent for others to claim cenvat credit. The main idea behind this proposal is to lay the ground for the goods and service tax (GST). Also with the newly-imposed cenvat credit, the textile industry will be able to avail offset for the tax it pays on inputs used so it would only benefit them and the effective incidence of tax would also be lower because of the credit for taxes.
In protest against this imposition of unprecedented excise duty the industry had called for a closures and protests. Rallies and sit in protests were organized across major centers like Delhi, Kolkata, Mumbai, Tirupur, Ludhiana, Kanpur, Ahmedabad, Indore, Saharanpur, Bangalore and Varanasi. Also major textile retailers downed shutters nationwide as a mark of protest.
