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Duty rationalisation for man-made textiles More allocation for textile schemes; Rs 189 cr for textile parks

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Spinners gain
So far, since the tax on raw materials was higher than the levy on the finished products, spinners had been facing difficulties in getting full credit on excise, while selling yarn to their customers.

EASING MACHINERY SHORTAGE: The Finance Minister has lowered customs on
EASING MACHINERY SHORTAGE: The Finance Minister has lowered customs on "specified" textile machinery and parts from 15 per cent to 10 per cent.

Our Bureau

New Delhi, Feb. 28

Taking forward the duty rationalisation exercise initiated by the UPA Government for the cotton textiles sector during the previous two Budgets, the Finance Minister, Mr P. Chidambaram, on Tuesday announced a comprehensive tax rationalisation package for the man-made textile industry.

In the Budget for 2006-07, the Finance Minister announced excise duty cuts on man-made fibre and filament yarn to 8 per cent from 16 per cent.

The duty rationalisation addresses a big anomaly in the existing tax structure on man-made textiles sector since the new tax rate structure would bring the excise duty on raw material, namely fibre and filament, on par with the finished product (yarn). So far, since the tax on raw materials was higher than the levy on the finished products, spinners had been facing difficulties in getting full credit on excise, while selling yarn to their customers.

Mr Chidambaram also slashed the import duty on man-made fibres, filament yarns and spun yarns, along with the duty on raw materials for the man-made fibre sector such as DMT, MEG and PTA, from 15 per cent to 10 per cent.

For paraxylene, the import duty has been reduced to 2 per cent from 5 per cent. "The man-made textile industry is a growth and employment driver. It deserves encouragement," he said in his speech.

Offering relief

According to industry analysts, the reduction of import duty on all man-made fibres and yarn is expected to provide relief since the domestic producers had been pegging their prices with the landed cost of imports.

In view of the ongoing shortage of textile machinery, the Finance Minister also lowered customs on "specified" textile machinery and parts from 15 per cent to 10 per cent. He also announced an enhanced allocation for the popular Textile Upgradation Funds Scheme to Rs 535 crore from Rs 435 crore. The scheme comes to an end on March 31, 2007.

Textile parks

In case of the Integrated Textile Parks scheme, the Minister announced a sum of Rs 189 crore and said the Centre has so far sanctioned seven textile parks and 10 more parks have been identified for development. He also said Jute Technology Mission would be launched in 2006-07 and Rs 50 crore will be allocated for development of handloom clusters.

Mr Chidambaram also announced that a scheme similar to TUFS would be introduced for the handloom sector. The overall allocation for handloom sector has gone up to Rs 241 crore from Rs 195 crore.

(This article was published in the Business Line print edition dated March 1, 2006)
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