Sinha gives special package to textile, excise down to 12%

In a bid to revive the textiles sector from the severe impact of the global slowdown, the government on Thursday announced a major budgetary package including a near 25 per cent cut in excise duty at 12 per cent and dereservation of knitwear from the small scale industry list.

However, there was bad news for some on account of removal of excise duty concessions from certain segments like hank yarn and independent processors.

Presenting the Union Budget, Finance Minister Yashwant Sinha said he had carved out a special package of incentives for the textiles industry in view of the challenges following the phasing out of the Multi-Fibre Agreement in 2004.

Many of the proposals are in line with recommendations made by the steering group on textiles headed by Planning Commission member N K Singh.

In view of the misuse of excise exemption being given to cotton hank yarn, Sinha said it would be brought under the excise net at eight per cent.

"In order to ensure that the benefit accrues only to the handloom weavers, I propose to bring hank yarn within the net of excise duty at eight per cent, but at the same time, provide for an appropriate subsidy on the price of the hank yarn purchased by them," he said.

The excise exemption granted to hand processing of the textile fabrics by independent processors has also been curtailed to only three processes namely - scouring, hydro-extraction and calendering.

Excise exemption was so far extended to 12 specified processes of cotton fabrics and seven processes in case of man-made fabrics.

In view of the removal of excise exemption, Sinha said that the compounded levy scheme for independent power processors would be abolished.

The new concessions given by Sinha included extension of the excise exemption to handloom garments. "I now propose to grant exemption to handloom garments also from excise duty subject to certification by Handloom Export Promotion Council."

In another concession, Sinha said weavers of grey fabrics as well as the knitting sector would be allowed to pay excise duty on an optional basis.

Knitwear has been dereserved from the SSI list, Sinha said, adding that as an exception, "rate of excise duty on fabrics, made-ups and garments would be 12 per cent".

The reduction in excise to 12 per cent from 16 per cent earlier would continue until Feburary, 2005, he said while clarifying that the industrial fabrics would however continue to be charged an excise duty of 16 per cent.

"In order to enable textile industry to modernise itself and acquire new technology, I propose to exempt duty on automatic shuttleless looms," he said, adding that excise duty would also be exempted on specified processing machinery, specified silk reeling, weaving and twisting machinery and jute machinery.

While announcing the removal of special excise duty on a number of items, Sinha said the 16 per cent SED would continue on polyster filament yarn.

PTI

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