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Thursday, Jan 23, 2003

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Textile machinery units seek changes in duties

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The industry, in a pre-Budget presentation, has asked for an 8 per cent excise duty rate for all textile machinery, including raw materials, components and accessories which can lead to zero per cent over the next 2-3 years.


THE textile engineering industry wants the Centre to end anomalies in the levy of excise, customs and sales tax relating to textile machinery.

This, it feels, should be done by evolving a unified system that allows the end-users to invest in modernisation and peps demand for indigenous machinery manufacturers.

In the case of customs duty, it should be 10 per cent lower on imported raw material, intermediary and components/parts that go into manufacture than the duty applicable to finished products to provide a level playing field to the domestic industry and the overseas machinery makers.

The Federation of Indian Textile Engineering Industry (FITEI) representing domestic textile machinery manufacturers, has pointed out that the current excise duty rate at 16 per cent on machinery, parts and accessories has proved exorbitant for the capital goods. Further, the system of two-year deferred cenvat credit has blocked substantial working capital.

In addition, the inputs of as many as 44 textile machinery offered excise duty exemption as per the notification (No.6/2002) dt March 1, 2002, are not eligible for the Cenvat credit. This makes the cost of machines quite high for the small- and medium-scale units seeking modernisation of their plants. Hence, the suggestion to bring down the excise to zero.

Wherever the excise duty is made zero at present, similar concession should be extended to the inputs including the raw materials, parts and accessories. To make good the higher initial outflow of funds for local purchase of machinery by export-oriented units and export-promotion capital goods licence holders, the FITEI has asked for excise duty exemption for the machinery supplied to the EPCG licence holders.

Pointing out the lower credit offtake under the Technology Upgradation Fund (TUF) scheme, the FITEI has recommended increasing the interest rebate eligible under the scheme from the present 5 per cent to 8 per cent. Interest rebate incentive against credit under the TUF for scrapping obsolete/dormant spindles which could be replaced with lower number of new spindles and replacing the old plain looms with new automatic/shuttleless looms without any obligation should be permitted. It also suggested that the list of machinery eligible for concessional rate of customs duty should be pruned so as to eliminate machinery which could be locally manufactured at a technology comparable to the imported ones.

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