The imposition of 10 per cent excise duty on branded products by the Centre, the textile industry, of which hosiery and readymade garments is an integral part, has been dealt with body blow.
In a letter to Union Finance Minister Pranab Mukherjee, Karnataka Hosiery &Garment Association and Taxation Committee Chairman Sajjan Raj Mehta has sought its withdrawal.
Earlier, the levy was 4 per cent and optional for garment makers who wanted to get refund under Centvat scheme. Since most did not register to claim Centvat, the duty was virtually zero. Now all branded garment makers pay 10 per cent duty on 60 per cent of MRP.
Large job provider
Being second largest job provider, the sector employs nearly 2.5 crore people in India with 40 per cent women. Shutting down small manufacturing units will result in mass unemployment. The domestic industry is worth Rs 40,000 crore made up of contributions from small-scale units scattered all over the country. Nearly 75-80 per cent of the industry still operates in the unorganised sector.
Texport Syndicate India Ltd, CEO & Director, Avinash Misar said on one hand, the government has opened up garment imports at zero import duty from Bangladesh which makes the Indian market highly competitive & price sensitive as Bangladesh products are inexpensive primarily due to low cost of operations in their country. On the other, it slaps excise duty making domestic garment industry products expensive and uncompetitive by 10 per cent.
Gokaldas Exports Limited Chief Mentor Rajendra J Hinduja said for garment exporters, the duty will create problems because even though exports are exempted from excise duty, all units will have to maintain detailed records, paper work will increase and man power cost will go up.
With severe competition from Bangladesh, Sri Lanka, China, Vietnam, the industry with 10,000 garment factories work on wafer thin margins. The levy will add to our headache, Hinduja added.
According to Arvind Brands Vice President & Business Head Alok Dubey said the excise duty has come at a time when cotton and yarn prices have gone up by 100 per cent.