The Hindu Business Line : Commissionerates in textile belt zone — Duty relief may burn a hole in excise revenue

THE Union Budget is likely to leave a big hole in the revenue mop-up of Central Excise commissionerates located in the hot textile belts, thanks to the excise duty exemption granted to the entire cotton textile spectrum by the Finance Minister.

The move may derail these excise commissionerates (such as those in Tamil Nadu overdependent on textile clusters for their revenuedrawals) in meeting their revenue targets.

For the Coimbatore Central Excise zone comprising five excise commissionerates, for example, the issue at stake is about Rs 600 crore revenue out of cotton textiles (cotton yarn and fabric) alone. The zonal excise authorities feel that as against the Rs 600-odd crore realised in the last fiscal from the textile sector, the excise income realisable from this sector during the current year would be hardly Rs 100 crore due to the excise exemption, and dropping of the `Cenvat' duty structure.

Excise circles point to the prospects of the zone seeking a revised target for the current year in view of the shrinkage of income from the textile sector. Earnings from textile for the zone formed roughly one-fifth of the total excise revenue of Rs 3,150 crore collected last year.

The authorities putting in place any alternative revenue route to compensate this loss appears far-fetched as the next immediate bet will be on the new service tax and the education cess it may collect. But these two will certainly not yield as much elasticity as needed to compensate the loss of income from textiles.

With most textile manufacturers likely to opt for the excise exemption route, the total number of producers registered with the Excise Department would also drop drastically. Of the 12,000-odd excise registered producers in the zone, the final number would come around 1,500, the sources told Business Line. The loss of income from textile account will be so huge for the zonal that it has to shelve the idea of forming a second commissionerate for Coimbatore.

But the dropping of the mandatory `cenvat' structure and the introduction of the dual system of excise exemption and the 4 per cent duty slab for those seeking to live with the `cenvat' route may also cause ripples of administrative wrangles for the excise officials, especially in handling cases. The same set of textile producers who prefer to go by the `exemption' route may also choose to retain the `cenvat' route as well.

The textile producers/traders, who are also into the export trade, and, thus, had been enjoying incentives such as `cenvat' credit, duty drawback and income-tax exemptions on earnings were the ones who were non-pulsed initially by the Government abolishing the `cenvat' duty structure.

These producers are likely to hang around for using both options. This may make matters difficult for the excise officials, it is learnt.

More Stories on : Textiles | Excise and Customs | Tamil Nadu

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