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Textile taxes in budget - shedding old for new |
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2004-7-13
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The withdrawal of Cenvat in the budget announced by Finance Minister P Chidambaram, brought cheers for handloom and powerloom sectors.
According to the provisions announced, there will be no mandatory excise duty on pure cotton, wool and silk, whether it is fibre, yarn, fabric or garment. Under the exemption route, no excise duty will be applicable under any stage, except on man-made fibre or filament yarn, as per the budget.
But for non-cotton manufacturers who opt for Cenvat route where credit can be taken for all excise duties paid at earlier stages, the uniform rate will be 8 per cent whereas for pure cotton sector, the uniform rate has been fixed at 4 per cent on yarn, fabrics, garments and made-ups.
For the man-made fibre and yarn industry that comprised polyester filament yarn (PFY) players such as Reliance Industries, were in for a disappointment with excise duties for the segment left untouched at 24 per cent, while that on man-made fibre is at 16 per cent. However, in the case of viscose filament yarn, the excise duty has been hiked to 16 per cent from 12 per cent.
Many associations supported by political parties had suggested that the optional duty system allowed previously be continued and the mandatory Cenvat chain abolished.
The finance minister’s proposals were largely welcomed by the industry with experts pointing out that it is coming at an opportune time when the quota regime is set to go by January 2005.
“It is a good budget,” said D. K. Nair of the Indian Cotton Mills Federation.
Industry analyst agreeing with Chidambaram perception said that while prices of fabrics will be moderate due to the changes in the tax structure, garment exporters could also stand to gain under the new structure.
They also pointed out that the budget, which has introduced for the first time the option of zero-tax regime for the cotton textile industry, would help the industry make major strides in the post-quota regime with exports now becoming more competitive.
Reacting to the budget proposals, Indian Spinners Association president R. L. Toshniwal said “Though the cotton textile industry would make significant progress in the post-quota regime, the earlier duty disadvantage of 5 per cent suffered by blended yarn has now widened.”
This would affect the industry leading to even closure of some units, he concluded. |
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