The textile sector is seeking removal of customs and excise duty on MMF and
their inputs, and also on the liquid fuels used as feedstock for their captive
power plants
The Indian Textile Industry is currently one of the largest and most important
industries in the Indian economy in terms of output, foreign exchange earnings
and employment.
The industry contributes 4 per cent to the country's GDP, 14 per cent to the
country's industrial production and around 12 per cent to the country's foreign
exchange earnings. However, the textile industry was one of the drastic hit
industries on the back of Global economic melt down.
The first half of the fiscal has observed hit due to sharp depreciation of
rupee, high power cost and the second half looked dreary due to high raw
material costs, tight liquidity and slump in demand in the exporting countries.
Resultantly, the labour intensive industry has observed many layoffs of the
skilled work pool in FY09. Although the problems relating to liquidity in the
industry was addressed in Interim Budget 2009-10, by releasing the entire
pending TUFS amount till FY 09, and extending interest subvention etc; these
measures didn't meet the needs of the industry.
Post general elections, with immediate action to help labor intensive and major
export exchequer -- Textile industry, GOI has extended helping hand by inviting
industry to explore seeking opportunities and diversifying to the new export
markets like Bahrain Kuwait, Oman, Saudi Arabia, Qatar and UAE, Latin America,
Russia and Oceania; implementing National Fiber policy; inducting momentum to
the implementation of Technology Up gradation Fund Scheme, Scheme for Integrated
Textile Parks and Technology Mission etc.
The textile ministry has also presented the short term strategy (rationalize
fiscal structure, exempt service tax, reduce interest rates on pre and post
shipment credit and facilitate faster clearance of arrears of terminal excise
duties and Central sales tax), medium tern (inducting momentum to the
implementation of Technology Up gradation Fund Scheme, Scheme for Integrated
Textile Parks and Technology Mission in 11th Five Year Plan period) and long
term strategy
However, the Textile Industry which was represented by CITI submitted a
memorandum to GOI suggesting the new measures that would make industry regain
its lost sheen in the coming years.
Duty Structure
Excise Duty
| |
Present |
Proposed |
| Liquid Fuels |
14% |
Nil |
| Man Made Fibers |
4% |
Nil |
| Textile Machinery |
4%-8% |
4% |
| Components and Spares |
8% |
4% |
Customs Duty
| Customs Duty |
Present |
Proposed |
| Man Made Fiber |
5% |
Nil |
| Liquid Fuels - Furnace Oil & Diesel |
10% |
Nil |
| Textile Machinery expect spindles |
5%-10% |
Nil |
Industry Expectations:
The industry expects excise duty of 4% on all man-made fibers, 14 per cent on
all liquid fuels used for captive power generation by T&C units and all service
taxes on Textile Units to be exempted. It also suggests exemption of Excise duty
on machinery procured from the domestic market against EPCG licenses. In
addition to the above, reduction in present 4-8 per cent excise duty on
machinery and 8 per cent on all components and spares to 4 per cent for all
textile machinery, components and spares is also looked at.
The industry also Refund all accumulated Cenvat credit of T&C units. Rule 5 of
the Cenvat Credit rules has to be amended suitably in order to facilitate refund
of accumulated Cenvat credit in T&C units
The Industry also seeks abolishing basic customs duty of- 5 per cent on all
man-made fibers, 10 per cent on all liquid fuels used for captive power
generation by T&C units, Duty ranging from 5 per cent to 10 per cent on all
machinery for textiles and clothing, except for spindles.
The Exemption is also expected on fibers and all inputs for T&C industry from
special additional duty of 4 per cent charged on fibers and many other products,
towards state duties levied on similar domestic products.
It also looks for exemption of 11.33 per cent of book profit on MAT credit
entitlement, 16.995 per cent of dividend distribution tax, FBT and Surcharge (10
per cent for all Corporate Taxes) for T&C industry
On the liquidity front the Industry proposes Rescheduling of loans for all T&C
units by permitting deferment on repayment of principal amounts for 8 quarters
on condition that the interest will continue to be paid during this period. To
accommodate rescheduling, a two year extension may be allowed for the repayment
period for term loans. Addition to the above, Under TUFS, extension of repayment
period may be permitted beyond the currently stipulated 10 year period.
The Industry seeks increasing 2% interest subvention to 4 per cent and allowed
until March 2010.
It also suggests, that accumulated cenvat credit and delays in payment of TUFS
assistance, refund of TED, rebate of excise on exports etc should be considered
as delayed dues from government as receivables for assessment of working capital
for T&C units
Higher domestic prices were hurting its textile industry. So the industries
asked for withdrawal of MSP for Cotton or alternatively dispose of procured
cotton promptly at international prices.
Although India is second largest producer of cotton, lower domestic mill use as
against other countries doesn't support export competitiveness of cotton. Thus
it suggests Government to with draw the export incentive of 5 per cent on cotton
under Vishesh Krishi and Gram Udyog Yojana (VKGUY) effective from 1st April 2008
to 30th June 2009.
The industry seeks Permit without restriction for wind energy generators as
against only within limit of 25 per cent stipulated for other expenses under
TUFS; Abolish Hank Yarn Obligation as against 40 per cent of yarn production to
be packed on hanks by all spinning mills, except in the case of hosiery yarn and
export production and Restore pre reduction rates that were reduced
substantially in September 2008; Take fuel duties into account for calculation
of Draw Back rates.
State Level Duties like CST, electricity duty, mandi tax, entry tax and other
local as well as state level duties and taxes amount to 4-6 per cent of FOB
value of export. All taxes are admittedly refundable to exporters. Since State
Governments May be refunded by Central Government
Companies to watch
Aditya Birla Nuvo [Get Quote], Alok Industries [Get Quote], Indorama Synthetics,
JBF Industries [Get Quote], Garden Silk Mills [Get Quote], Vardman Textiles,
RSWM, Raymond etc.
Outlook
Diversifying export's portfolio of textile industry to various other countries
will reduce risk of dependence on US and EU nations and improve the foreign
earnings.
The exemption of excise and customs duty on liquid fuels, abolition of service
charge, Rescheduling of loans for all Textile & Clothing units will reduce
pressure on the industry and will help to improve liquidity in the Industry.
The assurance of government to help textile industry even before the Budget;
gave much higher expectations on the relief measures. Thus exporters, Man made
fiber industries are expected to be better placed.
Source : Rediff