Flaunting labels and dressing up in branded clothes may not come easy on the pocket anymore. As the Union finance minister Pranab Mukherjee has played spoil sport by imposing a 10 per cent excise duty on branded apparels. The hike comes
as dampener to an industry which is already struggling to deal with spiraling cotton prices. According to the Union Budget announced on Monday, 10 per cent excise duty has become universally applicable across all branded clothing. This has been done to bring the branded readymade garments sector under excise to meet the impending Goods and Service Tax regime where exemptions are not favored say experts. Till now, excise duty on branded apparel was voluntary. This meant that apparel makers who did not opt to pay the duty could also not credit or offset the tax paid by their suppliers for inputs. This optional excise duty was 4 per cent for cotton and 10 per cent for other goods. The new excise duty would apply to branded readymade garments and made-ups and not to those tailored or made to order for retail customers. The manufacturers would also be able to avail themselves of credit of tax paid on inputs, capital goods and input services. The budget also provides for extension of full SSI exemption for the readymade garment and made-up industry. Besides, export of these items would continue to be zero-rated.
However, some experts feel, the full incidence of 10 per cent excise duty, now mandatorily levied, will not be fully passed on to the consumer. It is only the duties on value addition which will be passed on. Meanwhile, the finance minister also announced a package of Rs 3,000-crore as part of the budget for 2011-12 to help the handloom sector overcome its financial problems. Stating that the details of the scheme would be worked out by the textiles ministry in consultation with the Planning Commission, the FM said the initiative would benefit 15,000 cooperative societies and about 3 lakh weavers across India. The budget also proposes an increase of about 6 per cent in the Plan outlay for the textiles ministry from Rs 4,725 crores to Rs 5,000 crores. The ministry's flagship Technology Upgradation Fund scheme is the major beneficiary with an increase in allocation from Rs 2,785 crores to Rs 2,980 crores, followed by the scheme for integrated textiles park, where the allocation has been hiked from Rs 182 crores to Rs 297 crores. The budget also provides for the setting up of a mega handicraft cluster at Jodhpur in Rajasthan and a reduction in the basic custom duty on raw silk from 30 per cent to 5 per cent.
