The Hindu Business Line : Customs duty cut on synthetic man-made fibres, yarns

THE N.K. Singh Committee on textile sector has recommended a reduction in customs duty on capital goods of man-made and synthetic fibre/yarn industry from 25 per cent to five per cent. A similar dispensation has also been suggested for certain garment sector machinery.

Sources said that the Committee, which submitted its report recently to the Finance Minister, Mr Jaswant Singh, has also made a case for exempting domestic production of such machinery, whose import is exempted from countervailing duty, from CENVAT. It has also recommended a reduction in customs duty on intermediates of synthetic fibres and yarns (Di-Methyl Terephthalate /Purified Terepthalic Acid/ Mono ethylene Glycol/Caprolactum) from 20 per cent to 15 per cent.

On the excise duty front, the Committee is understood to have recommended a reduction in duty on synthetic filament yarns — polyester filament yarn and partially-oriented yarn — from 32 per cent to 24 per cent in the first year and 24 per cent to 16 per cent in the second year.

The Task Force on indirect taxes, chaired by Dr Vijay Kelkar, has however recommended that the excise duty on polyester filament yarn be reduced from 32 per cent to 28 per cent in 2003-04 and then to 24 per cent in 2004-05 and 20 per cent in 2005-06 before reducing it to 14 per cent in 2006-07.

The Committee has, however, recommended that CENVAT be retained at 16 per cent on all man-made and synthetic fibres. A suggestion has also been made for bringing at par the excise duty on polyester-cotton blended and viscose-cotton blended yarn.

While recommending the discontinuation of CENVAT credit on deemed basis, the Committee has also made a case for extending the unbroken CENVAT chain to the entire textile sector. It has also suggested the continuation of the present excise exemptions to the genuinely disadvantaged sectors.

Further, a recommendation has been made on retention of the SSI excise exemption/CENVAT exemption to the sectors such as fabrics woven on handlooms, khadi, silk yarns and hand processing without the aid of power.

Besides the constitution of a Textile Industry Reconstruction Fund with a corpus of Rs 3,000 crore for financial restructuring of the industry, the Committee has, in its package, suggested that the textile industry be allowed to access external commercial borrowing for purchase of indigenous machinery under the Technology Upgradation Fund Scheme.

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