Ludhiana garment industry likely to come under the excise net

The garment manufacturing industry in Ludhiana unhappy with the third budget of the NDA government as it has imposed a two percent excise duty on branded readymade garments having retail price of over Rs1000, with an aim to bring in readymade garment manufacturers in the excise duty net but this will lead to increase in price of all branded garment by almost 1.8-2 percent.

This move will be a setback to the micro-small and medium garment manufacturers who make branded garments for big garment houses. Till now, manufacturers who did not claim input tax credit had to pay zero excise duty. In the present budget, Finance Minister Arun Jaitley has proposed to levy the duty on all garments that sell over Rs 1,000, on those manufacturers who want to claim the input tax credit or CENVAT paid on various raw materials.

Though attempts have been made in the past to levy excise duty, it has been withdrawn following protests by manufacturers.

Ajit Lakra, president of the Ludhiana Knitters Association and head of the textile division of the Federation of Industrial and Commercial Organisations, said that though the budget was inclusive and aimed at giving a fillip to the under-privileged, the garment manufacturing micro, small and medium enterprises (MSME)had been discriminated against condemning the imposition of the excise duty.

As no branded garment is sold for less than Rs 1,000, almost all garments will invite the levy of two percent excise duty. This brings all manufacturers under the excise net and removes any ease of doing business as they will have to maintain records besides breeding corruption in an apparent interface with taxation authorities.

He said that the manufactures would protest this levy. The Ludhiana garment manufacturing industry alone generates a turnover of around Rs 3,000 crore per annum, with most sales being in domestic market.

Sandeep Jain, executive director of Nahar Group of Companies, said that with the Goods and Services Tax rollout expected soon, no was no need for bringing this new levy, especially when the textile industry was passing through a rough phase.

Komal Jain, chairman of Duke Fashion India Ltd, said that to promote garment manufacturing, which is a highly labour-intensive industry, they were expecting some concessions and impetus to technical upgrade. With the new levy, they have been hit hard. This will disturb the trade, which is mostly in the MSME category.