The government's move to provide partial relief in excise duty on branded garments' in the Budget will help improve profitability, retailers and manufacturers today said but ruled out immediate price cuts.

“The latest change in the Budget is a small one though, but it will provide a certain amount relief in terms of stability of product prices,” ITC Lifestyle Retailing Chief Executive Mr Atul Chand.

There might also be some price reduction over a period of time but not immediately, he added.

Finance Minister Mr Pranab Mukherjee has raised abatement on branded garments from 55 per cent to 70 per cent thereby bringing down the effective excise to 3.6 per cent from 4.5 per cent earlier.

He has announced increasing the overall excise duty rate to 12 per cent from 10 per cent earlier.

Manufacturers also expressed similar views that it is too little for the garments industry that has been under pressure due to several reasons, including the excise duty, high cotton prices and overall slowdown.

“Such a small difference is unlikely to translate into reduction of prices, but it will help bottomlines of manufacturers,” said Clothing Manufacturers Association of India (CMAI) President Mr Rahul Mehta. Without specifying when and how much will retailers pass on the benefit of reduced excise to consumers, Future Group CEO Mr Kishore Biyani said: “Increase in abatement on the excise duty for branded ready-made garments is a welcome step. It will benefit the apparel industry and help reduce prices and in turn increase consumption.”

According to DLF Brands Chief Executive Officer Mr Dipak Agarwal, the cost of importing garments is also very high in India.

“Branded garments in India attract very high duties, which in turn makes it difficult for companies to pass the cost on to the consumers. High prices also adversely impact demand and volumes,” he said.

Mr Agarwal said in the last 4-5 years, duties on imported branded garments have gone up from 15 per cent to around 30-35 per cent.

CMAI, which had last year vehemently opposed the move to impose 10 per cent for the first time in 2011-12 Budget, along with industry associations and retailers said even this time around the sector's demand has not been met.

“It is disappointing that request to roll back the excise on branded garments was not considered. However, if we look in isolation, the Finance Minister has definitely given some relief as effectively the tax would come down by 0.9 per cent,” Mr Mehta said.

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