Ref. No -1999/2010-11 March 3, 2011
Respected Mukherjee Sahib,
In Para 156 of your budget speech you stated as follows”
Ready-made garments and made-ups of textiles are currently under an optional excise duty regime. A manufacturer is required to pay duty only if he wishes to avail of Cenvat credit. Our garment and made-ups industry has come of age and has shown handsome growth in recent years. As part of base expansion, I propose to convert the optional levy into a mandatory levy at a unified rate of 10 per cent. The levy would however, apply only to branded garments or made-ups and not to those tailored or made to order for a retail customer. Credit of tax paid on inputs, capital goods and input services would be available to manufacturers of these products. Keeping in mind the fragmented nature of this industry, full SSI exemption is also being extended to these products. Export of these items would continue to be zero-rated.
In 2004, the then Finance Minister Mr. P. Chidambaram in his budget speech has stated as follows.
If I have understood correctly the mind of Hon’ble Members of Parliament, and of the leaders of various political parties, i believe that there is a universal demand to free the handloom and powerloom sectors from the Cenvat regime. After giving ay anxious consideration to the complex issues, I propose to withdraw the mandatory Cenvat duty. Instead, I propose to introduce a new tax regime for the textile sector and, in this exercise, i am happy to say that i have the full support of the Minister of Textiles.
Para. 144 Let me now explain briefly the new regime.
• Firstly, the mandatory Cenvat chain will stand abolished
• Secondly, there will be no mandatory excise duty on pure cotton, wool and silk, whether it is fibre, yarn, fabric or garment.
• Thirdly, blended textiles and pure non-cotton (polyester, viscose, acrylic and nylon) will have a different tax regime.
• Fourthly, there will be a mandatory excise duty on man-made staple fibre at 16 percent; on polyester filament yarn (including textured yarn) at 24 per cent; and on other man-made filament yarn (including textured yarn) at 16 per cent.
Every manufacturer – be it handloom or powerloom or composite mill – will have the option to choose between two routes. One will be the exemption route and the other will be the Cenvat route. Under the exemption route, no excise duty will be payable at any stage (except on man-made fibre and filament yarn). Under the Cenvat route, credit can be taken for all excise duties paid at earlier stages. For the purposes of the optional Cenvat route, it is necessary to specilfy in the Tariff schedule the applicable excise duty rates. For the pure cotton sector, the uniform rate will be 4 per cent on yarn, fabrics, garments and made-ups. For the blended textiles sector and pure non-cotton sector, the uniform rate will be 8 per cent.
The same has been annexed herewith as annexure No. 3.
I was in my constituency Ludhiana, which as you know is the hub of Garment and Hosiery Industry in North India. Lakhs of people depend upon this industry for their bread and butter.
However the Industry is of a very fragmented nature whereby it is impossible to really complete the Cenvat chain.
Almost every association associated with the Garment & Hosiery Industry has represented to me that status Co may be restored and readymade garment and made-up of Textiles should be retained under the optional excise duty regime.
Given the hardship this decision would cause to lakhs of small entrepreneurs, I humbly request you to restore this industry to its pre-budget position by making the excise duty regime optional.
1. Representations received from Garment Associations.
2. A Chart giving the costing break-up of this Industry.
3. Copy of the Speech of Sh. P. Chidambaram
Sh. Pranab Mukherjee,
Hon’ble Finance Minister,
Room No. 132 – C, North Block,