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16% excise on garments to fetch govt Rs 2 billion

Santosh Tiwary

The revenue department has estimated collection of Rs 2 billion from the 16 per cent excise duty imposed on garments in the current fiscal.

Sources said that with no concrete data available about the sector, a conservative figure of Rs 2 billion has been targeted. They, however, added that there was a distinct possibility of realising substantially higher revenue from the garment sector.

Union Finance Minister Yashwant Sinha had proposed imposition of 16 per cent Cenvat on branded garments in the budget for the current fiscal.

However, moving the amendments to the Finance Bill 2001, he exempted SSI units from paying excise duty and brought unbranded garments under the tax net. Sinha also exempted clothing accessories from payment of 16 per cent Cenvat.

Sources said that exemption to the clothing accessories will result in a revenue forego of around Rs 200 million. Exclusion of SSIs and inclusion of unbranded garments made the amendments in this regard revenue neutral, they added.

The Finance Act 2001 has exempted manufacturers of handkerchiefs, shawls, scarves, mufflers, mantillas, veils, ties, bow ties, cravats, gloves and other clothing accessories from the 16 per cent Cenvat.

It has also exempted raincoats, undergarments and clothing accessories from payment of excise duty. The assessable value for calculating 16 per cent Cenvat on readymade garments has been fixed at 60 per cent of the retail price.

Sources said that to keep the small readymade garment manufacturers out of the excise duty net, the SSI excise duty exemption has been extended to the sector.

The clearances up to Rs 10 million from May 1, 2001 in the remaining part of the current financial year, will be exempt from excise duty.

Clearances of garments up to April 30, will be taken into account for computing the exemption limit of Rs 10 million.

The duty paid on clearances before May 1, 2001 shall not be eligible for any refund.

Clearances by or on behalf of a manufacturer from different factories or job-works will be clubbed while considering the Rs 10 million exemption limit.

Similarly, clearances of one factory if run by different manufacturers will be clubbed together for this purpose.

The merchant manufacturers, holding the responsibility of paying excise duty manufactured on job-work basis, will also be able to take the benefit of the SSI excise exemption benefits.

A garment manufacturer producing goods on his own account will be eligible for taking duty credit under Cenvat rules on the inputs and capital goods.

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