Indian synthetic fibre producers demand neutral excise duty structure

Producer of Synthetic fibre in India have urged the government to remove bias and anomalies in excise duty structure against the man-made fibre industry as it has been affecting the growth and impeding from achieving a larger share of the global market. At present India’s share in global exports of value-added textiles of MMFs is just about 3 percent.

They want the government to bring down excise duty on par with cotton fibre and yarn for growth of the Indian textile sector.

The excise duty imposed on man-made fibre and yarn in India is 12 percent while cotton yarn and fibre are exempted from excise duty burden, leading to excessive bias against man-made fibres and yarn. It is this undue bias against MMF and yarn which has left India far behind China in terms of investment , scale of manufacturing and exports.

India the world’s second largest producer of MMFs with presence of large plants having state-of-the art technology constitute almost two-third of the domestic textile market . But only 27 percent of India’s textile exports come from MMFs, it has not grown beyond USD 40 billion.

In contrast, China has given a big push to synthetic textiles and this has helped it become the world’s largest textile exporter. Almost 80 percent of China’s textile exports consist of synthetics.

According to Director General S C Kapoor of Association of Synthetic Fibre Industry (ASFI), in the domestic market, poor consumers suffer as the least expensive polyester shirt or a saree made of synthetic fibre is bought at Rs 100 or Rs 150 which suffers a huge excise duty burden of 12 percent.

In contrast, no excise duty is paid on cotton fibre and yarn used to produce expensive cotton shirts bought by rich consumers at prices ranging above Rs 1,000. Therefore, only the poor pay more tax on textiles in the domestic market while the rich are favoured with no excise duty on the premium cotton worn by them.

In Sri Lanka, China, Indonesia, Thailand and Pakistan have imposed uniform duty on both cotton and synthetic fibre and yarn of 20 percent, 17 percent, 10 percent, 7 percent, and zero percent. While in Bangladesh it levies a duty of TK 1.5 per kg on both cotton and synthetic yarn.