Budget Impact on Textile Sector
Overall impact: Neutral
In the current budget session, the Finance Minister
expressed concerns about the state of the Indian textile industry and stressed
the need to prepare itself for the challenges ahead, in light of phasing out
of the Multi Fibre Agreement (MFA) by 2004. At present the industry is the second
largest employment generator after agriculture. Keeping the strategic importance
of the textile sector in view, a special package has been announced for the
industry.
Excise Duty
Duty on yarns has been maintained except on
cotton yarn in hank form, on which the exemption has been withdrawn and excise
duty of 8% imposed.
Duty on processed fabrics has been reduced from
16% to 12%. In case of all unprocessed fabrics excise duty of 12% has been
made optional.
Duty @ 12% has been imposed on processed knitted
cotton fabrics on an optional basis. Exemption on handloom fabrics processed
with the aid of power by a factory owned/approved by a handloom development
agency however continues.
Duty on textile made-ups and woven garments
has been reduced from 16% to 12%.
Duty @ 12% has been imposed on knitted or crocheted
garments on optional basis.
Ready made garments made from handloom fabrics
are exempted from excise duty subject to declaration to this effect by the
manufacturer and certification by the Handloom Export Promotion Council.
Optional compounded levy scheme for independent
textile processors has been abolished.
Customs Duty
Customs duty on specified items of reeling,
twisting, weaving and processing machinery for silk textile industry has been
reduced from 25% to 10%. These items have also been exempted from CENVAT.
CENVAT exemption has also been extended to 28
processing machinery, automatic shuttle looms and specified jute machinery.
The concessions to the textile machinery would be available up to 28-Feb-05.
