Clothing Manufacturers Association of India (CMAI) has urged the Union Government to withdraw Excise Duty on Branded Readymade Garments and continue the Optional Duty Regime that applies currently, until GST is introduced.
Addressing a seminar on Excise Duty on Branded Readymade Garments in Mumbai on March 6, CMAI President Rahul Mehta said that “once GST is introduced, the whole value chain will be covered under duty and traceability, as well as compliance will improve tremendously and implementation problems will also ease considerably”.
A few years ago, the previous government had introduced Excise Duty on finished products, even while maintaining the exemption for upstream products, on an experimental basis that turned detrimental to the industry, leading to the government eventually recalling the excise duty. According to CMAI, this new step by the current government would only be repeating that experiment at a time when the Indian textiles and apparel industry seems to be going through a tumultuous phase.
“We have in the past pointed out time and again that the very task of collecting this Excise Duty from the highly dispersed and mostly tiny units in the Garment Sector would be a formidable one for the Government, especially when the rest of the value chain remains exempted and therefore traceability is a serious issue. The large number of small and tiny units in the sector will also find it impossible to follow the procedures involved. The result will be that evaders will prosper and compliant units will suffer…
The Revenue for the Government from this decision will be negligible, whereas problems that it would create for the industry will be huge,” Mehta maintained. Introducing the Rs 1,000 cut-off price point for applicability of Excise Duty will further complicate the already shaky situation.
The CMAI has claimed that the government’s move will only encourage the mushrooming of more small, under-productive manufacturing units, producing questionable quality and veering towards the unorganized sector.
CMAI had organised the seminar to address these fears among industry players and to educate them about the various aspects of the excise duty. The event saw participation of Shailesh Sheth, Advocate and an Indirect Tax Practitioner, who was invited as a key note speaker, who stated that there has been “an all-round confusion and panic among the industry due to this sudden re-imposition of Excise Duty”.
At the seminar, Sheth pointed out that the tariff value for garments brought under the levy has been raised from 30 per cent to 60 per cent of RSP. While the benefit of small scale exemption of Rs 1.50 crore has been extended to the industry, it has been restricted to Rs 12.5 lakh for March, 2016, he added.
