The
Cenvat Scheme has been made optional.
There will be a mandatory excise
duty only on man made fibres and
filament yarns (including textured
yarns)
Man-made
staple fibres i.e. tows and staple
fibres and wastes thereof would
continue to attract duty of 16%.
However,
waste of manmade fibres, other
than those arising during the
course of manufacture of manmade
fibres or filament yarns attracting
mandatory duty, has been exempted.
Polyester
filament yarns, including polyester
textured yarns would continue
to attract duty of 24%.
Excise
duty on other synthetic and artificial
filament yarns has been increased
to 16%.
All
other textile goods e.g. spun
yarns, grey or processed fabrics,
garments, made-ups and textile
articles, of chapters 50 to 63,
have been exempted from excise
duty provided no credit under
the Cenvat Credit Rules, 2002
is taken. The exemption is optional.
For those opting to pay duty,
the rates of excise duty will
as follows:
All textile goods made of
pure cotton, not containing
any other textile material
- 4%.
Other textile goods - 8%
Textiles
and textile articles, presently
attracting 'Nil' tariff rate,
would continue to do so, except
for silk yarn, yarn spun from
silk waste, woven fabrics of silk
and silk waste (of hearing Nos.
50.04 and 50.05). For these items
an optional duty of Nil (without
Cenvat credit) or 8% (with Cenvat
credit) has been prescribed. The
tariff rates for these items have
been suitably amended.
All
textiles and textile articles
falling under chapter 50 to 63
have been fully exempted from
duties under Additional Excise
Duty (Goods of Special Importance)
Act and Additional Excise Duty
(Textiles and Textiles Articles)
Act, wherever applicable.
Manufacture of polyester filament
yarns on job work has been excluded
from the purview of notification
No. 214/86-Central Excise.
Central
Budget a Timely Push for Textile Industry
Thursday,
8th July, 2004: Dr BK Krishnaraj
Vanavarayar, Chairman, Indian Cotton
Mills' Federation (ICMF) has welcomed
the Central Budget presented by Mr P
Chidambaram, Finance Minister and stated
that the textile package in the Budget
will give a timely push to the textile
industry as a whole. The industry is
on the threshold of free trade in the
international markets and huge investments
are required to face the challenges
and to use the opportunities that free
trade would generate. The textile package
is an innovative exercise in the prevailing
circumstances.
Giving an option
for the entire textile industry to
join the CENVAT Chain and take CENVAT
credit for the raw material or to
stay out of the CENVAT Chain has provided
a level playing field between the
decentralized and organized units.
This can reasonably be expected to
generate the required huge investments
in the organized weaving and processing
industries and in the garment sector.
The huge allocations
made for agriculture and rural sectors
will substantially increase the purchasing
power of the rural population, which
in turn will benefit the entire industrial
sector and especially the textile
industry.
For units which
join the CENVAT Chain, unification
of rates for the entire cotton line
at 4 per cent and the entire non-cotton
line at 8 per cent would substantially
simplify the excise procedures and
transaction cost.
However,
retaining the duty on Man-made fibre
at 16 per cent and raising the duty
in Viscose Filament from 12 to 16
per cent, would lead to a mismatch
in the Man-made Fibre line, even for
the units which join the CENVAT Chain.
We would, therefore, request the Finance
Minister to reduce the duty on Man-made
Fibre suitably to remove this imbalance.
ICMF's
Post-Budget Memorandum
The
Textile industry as a whole and the
Indian Cotton Mills' Federation as its
apex body, are extremely grateful to
you for the Textile Package incorporated
in the Central Budget presented by you
on the 8th July 2004. A complicated
fiscal duty structure involving exemptions
and concessions for several sectors
and differential duty rates based on
size, processes etc., had led to severe
distortions in the structure of the
industry in the past. The innovative
and imaginative fiscal reforms incorporated
in the current Budget for textile sector
have removed all these distortions and
established a level playing field in
which each segment of the industry can
perform on the basis of its inherent
competitiveness. The choice of paying
excise duty and claiming cenvat credit
or opting out of the cenvat chain that
you have offered to all the segments
of the industry will have the effect
of directing investments based on the
viability of the units rather than on
the benefits that would be available
from the Government. This will also
end duty evasion and harassment that
prevailed in the past.
Our interaction with various segments
of the industry shows that each segment
has found the fiscal duty structure
in the present Budget to be non-discriminatory
and industry-friendly.
However, there are certain policy
inputs required for assisting the
industry to take advantage of the
positive fiscal duty structure in
the Budget and the emerging opportunities
in the international markets after
abolition of bilateral quotas by the
end of the current year. We had brought
some of these points to your notice
when you were with us to release our
Vision Statement for the Textile Industry
on 5th August 2004. The specific points
which need your urgent attention are
explained below:
Customs
Duty:
Import
duty for man-made fibre should be reduced
to 10%.
Import
duty for man-made fibres viz., polyester,
viscose, acrylic etc., applicable at
present is 20%. Even for an agricultural
commodity like cotton which is also
a widely used raw material in the textile
industry, the import duty applicable
is only 10%. In the case of man-made
fibres more than 95% of consumption
in the country is from domestic production
and import constitutes less than 5%
of consumption. Therefore, there is
no revenue compulsions for maintaining
high import duties. The domestic producers
are very few in number and are mostly
very large and highly profitable units.
Therefore, there is no justification
for maintaining a high import duty for
man-made fibres. It is also noticed
that because of the near monopoly situation
prevalent in man-made fibres, the domestic
producers have been increasing prices
frequently. We have noticed the warning
that you have issued in a press statement
on the 10th August 2004 that there is
no justification for hiking prices by
taking undue advantage of rising global
prices. Man-made fibre is a segment
where this process is clearly evident.
We would, therefore, request that the
import duty on man-made fibres may be
reduced to 10%.
More
machines should be added for concessional
duty of 5%.
The conducive investment climate
provided by the Budget and the growth
opportunities expected to come up
in the international markets can be
effectively utilized for modernisation,
only if textile machinery is available
at affordable prices. While, the domestic
textile machinery industry is able
to provide several kinds of machinery
to textile industry, there are a few
machines where the domestic industry
is either not able to supply or is
not able to maintain international
standards in quality and prices. We
had submitted a list of such machines
in our Pre-Budget Memorandum where
import was the only viable option.
However, most of these machines still
remain outside the list of machines
eligible for import against the concessional
duty of 5%.
We are once again attaching (Annex
I) the list of textile machines where
domestic supply is either not available
or is not competitive in terms of
quality and prices, with a request
that these may be included for import
by the mainstream textile industry
at the concessional import duty of
5%.
Excise
Duty:
Excise
Duty on man-made fibre should be reduced
to 8%.
In
the man-made segment, the excise duty
applicable to textile products under
the Budget proposals is 8%, for those
who opt for cenvat. However, the mandatory
duty on man-made fibre is 16%. We would
request that the excise duty on man-made
fibre may be reduced to 8%, in order
to avoid accumulation of unused credits
with spinning mills.
Credit
balance in AED (T&TA) should be
useable for payment of BED.
You
have abolished AED (GSI) and AED on
Textile and Textile Articles and we
are grateful for these welcome reforms.
However, while credit accumulated on
AED (GSI) has been allowed to be used
for payment of basic excise duty, this
facility has not been extended to credit
accumulated on AED (T&TA). We would
request that accumulated credit of AED(T&TA)
may be allowed for payment of BED.
Excise
duty on textile machinery should be
reduced
ICMF
is in favour of developing a strong
domestic textile machinery industry
so that the dependence of the textile
industry on imported machines can come
down over the years. We would, therefore,
request that excise duty on all textile
machinery may be reduced to 8%. This
will help modernisation of the textile
industry, in addition to development
of the textile machinery industry.
EOUs
It is noticed that the facility of
opting out of cenvat chain is not
available to 100% EOUs. Thus, 100%
EOUs continue to be under mandatory
excise duty on their domestic sales
and this has diluted their viability.
We would, therefore, request that
the procedure for de-bonding of EOUs
may be simplified so that EOUs that
find the current situation unviable
will be able to de-bond the units.
Our suggestions for simplifying the
procedures for de-bonding are attached
as Annex II.
We would request that the above suggestions
may be considered before moving the
Finance Bill so that the Budget would
incorporate these improvements when
passed by the Parliament.
Annex-I
List
of Additional Textile Machinery for
Concessional Import Duty at 5 %
