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Branded apparel players have been slapped 2 per cent excise duty on readymade garments with a retail sale price of ₹1,000 and above.
This will apply only to manufacturers who do not claim input tax credit (ITC) or central value added tax (Cenvat).
Those who claim ITC will, however, need to pay 12.5 per cent duty, where it was 6-12.5 per cent earlier.
Rahul Mehta, President, Clothing Manufacturers Association of India, said: “All this while, we had the option of not paying excise if we did not pay Cenvat, but that is now two per cent. The net price increase for branded garments will go up between five and six per cent.”
According to him, companies are already paying service, income and sales taxes with excise now being the latest addition.
“It does not make sense as on the one hand we are talking about ‘Make in India’ to support manufacturing and, on the other, taxing textile manufacturers when the industry is the highest employment generator after agriculture.”
Ethnic brand Biba Apparel will pass on the hike to consumers. Siddharth Bindra, CMD, said: “We will have to pass on the hike and prices will go up correspondingly, if not more. The Centre should have at least waited for the GST and clubbed this along with it. It has come at a time when consumer sentiment was just starting to improve.”
Companies will have to walk the tightrope when it comes to increasing prices of branded apparel.
A brand manager at Aditya Birla Group said, “We are still evaluating whether to pass on the excise to buyers for brands like Van Heusen and Allen Solly since consumer sentiment is still down. At the same time, there is pressure on profitability. It will be challenging to absorb the higher levy and not pass it on.’’
Contain price levelsOther players are also trying to contain price levels, despite the excise hike.
Kewal Kiran Jain, Chairman & Managing Director, Kewal Kiran Clothing, said: “We will try to contain prices and continue with the trend of high discounting to ensure consumers do not feel the pinch of additional excise.”
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