The cost of branded garments and made-up textiles will go up by 10-15 per cent with imposition of excise duties as proposed in the Budget. Readymade garments and made-up textiles are currently under optional excise duty regime. But Finance Minister Pranab Mukherjee on Monday proposed in his Budget mandatory imposition of 10 per cent duty on this segment.
"Our garment and made-ups industry has come of age and has shown handsome growth in the recent years. As part of base expansion, I propose to convert the optional levy into a mandatory levy at a unified rate of 10 per cent," Mukherjee said.
The provision is aimed at bringing the branded readymade garments under the excise net.
Earlier, the excise duty on branded apparel was voluntary. But henceforth, the branded apparel manufacturer will have to compulsorily pay the excise duty of 10 per cent.
"Under the new regime as suggested by this Budget, though CENVAT credit of inputs and services would be available and exports would continue to be zero rated, the factories will have to register themselves with central excise, increasing the net transaction and administrative costs," said Apparel Export Promotion Council's Chairman Premal Udani.
This will severely impact industries with higher requirements of outsourced processing and services like the knitwear industries or other value added garments, Udani said.
Further, the industry, which has been reeling under high-cost of raw materials like cotton, feels the move would force them to increase the retail price by 10-15 per cent.
"It is a big shocker. We are already facing challenges in pricing because of increased input cost," Shoppers Stop Customer Care Associate and Managing Director Govind Shrikhande said.
Brands like Van Heusen, Levis, Louis Philippe, Allen Solly, Arrow and, Reid and Taylor would become expensive. Besides, the government has proposed to Levy 10 per cent excise duty on jute yarn, which was earlier exempted.
However, the new provision does not include small-scale industries and garments from tailor shops. The exports will also be excluded from the proposed provision.
Also, in a boost to the labour-intensive textiles export sector, the government has reduced customs duty on items like raw silk and acrylonitrile.
The basic customs duty on raw silk would also be reduced to 5 per cent from 30 per cent. On acrylonitrile, a chemical used to produce synthetic fibres, the duty would come down to 2.5 per cent from 5 per cent.
