The Clothing Manufacturers Association of India (CMAI) has urged the Government to continue excise duty exemptions on branded garments to help the industry come out of the recession completely.
An excise duty of 10 per cent was levied on branded garments in the 2010-11 Budget by the then Finance Minister Pranab Mukherjee. He increased it to 12 per cent in the subsequent Budget, with 70 per cent abatement.
His successor P Chidambaram removed the levy the following year to support the industry, which had been hit hard by the economic slowdown and currency volatility. The exchequer had to forego revenue of about ₹1,300 crore because of this move.
According to excise laws, a brand includes any garment, which has a name or any other identification mark on the product or package. Since all garments are sold with some label or the other, it is important to note that excise would be levied on all garments, said the Association in a press release.
In a representation addressed to Finance Minister Arun Jaitley, the Association said since 80 per cent of the industry is still in the small scale sector, the move to revive excise would be a major deterrent to the survival and growth of these small manufacturers. Rahul Mehta, President, CMAI, said the levy, if imposed, would put organised players at a disadvantage, as they compete directly with huge unorganised players who do not pay any tax.
“Nearly 50 per cent of a brand’s annual sales are made at discounted rates, ranging from 30 to 70 per cent. However, excise duty, which is levied at the time of dispatch from the factory, is calculated on the full price. Therefore, the burden of excise on the consumer is nearly twice than the intended levels,” Mehta said.