Monday, January 16, 2012

Request for withdrawal of excise duty on Branded Hosiery, Garments & Made Ups






Sub: Request for withdrawal of excise duty on Branded Hosiery, Garments & Made Ups

Respected Sir,

We take this opportunity to congratulate the UPA Government for providing us the stable Governance..Your focus on inclusive growth coupled with a plethora of welfare measures,incentive schemes and other benefits will go a long way in shoring up the development in the rural and semi urban areas of our country. We also appreciate the foresight with which the Government has
planned for the training of 30 lakhs of people in Textile and Garment sector, allocating funds for support of Handloom and Powerloom Sectors etc.

While the above have brought good cheer, the Textile Industry of which Hosiery and Readymade is an
integral part has been dealt a severe blow with the imposition of 10% excise duty on branded products last year.
We pray to you to urgently examine the matter and take up our request for removal of mandatory
excise duty on readymade garments.

We would like to highlight the various reasons why we are making this earnest request to you for
immediate roll back of excise duty on readymade garments:

The domestic industry is worth nearly Rs.40,000 crores, however this aggregate is made up of
contributions from various small-scale units scattered all over the country. Nearly 75% to 80% of the
industry still operates in the unorganised sector. In most of these set-ups one man handles all the
manufacturing and financial operations unlike the few big companies that have systems and separate
departments to handle the logistics of the business. It is pertinent to highlight that in 2004, the then
Honourable Finance Minister, Shri Chidambaram has clearly stated that the fragmented and
decentralised nature of the industry as one of the main reasons for removal of mandatory excise.

The industry operates through a network of job workers in an unorganised manner. For one
product, cutting, stitching and packing/finishing operations are done by separate units. Most of the
large brands in India manufacture under this system. Imposition of excise duty has exposed all these
small job working units operating for brands (no exemptions available for units manufacturing for an
outside brand) to inspector raj and paper work to meet the excise laws.

The common man's clothing need has been impacted by high inflationary trends in the last 2-3 years.. The whole country is facing difficulty in coping with severe food inflation, however its pertinent to know that "cloth" need of common man is under more inflation than "bread". A simple vest has seen 50% inflation, while a normal shirt has seen 30-40% inflation. In such a scenario, "common-man" was looking towards the Govt for relief. However with this one move, 10-15% inflation has been further imposed on us. This tantamounts to robbing an Indian the right of affordable clothing.

The apparel industry is the second largest employer after the agriculture industry giving employment to nearly 2.5 crore people all over the country and about 40% of the labour involved in garments are women. The slightest change in the employment dynamics or shut down of the small manufacturing units will result in mass unemployment. We would like to stress here that the apparel industry is one of the largest employers of women in the country. In the event of units closing down,
many women stand to lose their means of livelihood.

This has come at a time when our industry / trade is reeling under the pressure of high input costs
(Cotton Yarn, Elastic, Sewing thread, Labour, Packaging Material etc) and reduced domestic demand
due to rising prices of products.Cotton yarn prices have increased by over 100% in past years.
With excise, the economic burden on the manufacturers has multiplied and they are being forced
to transfer the cost on to the consumers, which has resulted in the increase in MRP. It is common
knowledge that Indian consumer is highly price sensitive, and this has directly impacted consumption.
As a result there is a big negative impact on the industry/trade leading to a slow down in growth
and render many out of business.

In the year 2003, the then Finance Minister Shri Jaswant Singh declared excise duty on finished
garments. Back then, in 2003, Smt. Sonia Gandhi, the Congress leader had supported the Garment
Industry and had appealed to the Government in power to re-examine the same. Today, nine years
hence not much has changed in the industry structure but the party that opposed the imposition of
excise on finished garments has levied it last year when the industry was in no state to bear the added burden.

Contrary to general perception, the term Branded Garments is not the exclusive domain of the elite
or the rich. Every garment, irrespective of the price it is retailed at has a label, a name or a symbol to
differentiate the product of a particular manufacturer from another. Thus, when one says ‘excise on
branded garments’, it translates to excise on the entire industry and shall be applicable to the entire
population – the rich, the middle class and the poor. In other words, the common man shall be as badly
affected as the elite.

It is ironical that in the textile value chain, excise has been levied on garments, but not on yarn and
fabrics, where it is has been kept as optional. Why the most unorganised segment of the textile chain
has been meted out this harsh treatment is beyond understanding.

While the domestic manufacturers have been levied with a 10% excise duty, the global names
retailing in India do not have to bear any such additional burden. This has resulted in a relative
advantage for imported products as the Indian products keep becoming more and more expensive. This
problem will be more severe in case of SAARC countries where duty free access has been granted. This
has led to domestic brands getting uncompetitive against imports from these countries especially
the likes of Bangladesh, Sri Lanka, etc. and eventually result in de-growth of the Indian industry.

The budget has kept the exports sector out of the excise net, however it has failed to realise that more
and more exporters are diversifying into the domestic market in view of the current global recession.
With single companies dealing in both domestic and export markets, it is going to become increasingly
cumbersome and tiresome to distinguish the goods under the export and domestic consignments
adding to the cost, time and energy spent by the manufacturer.

With the GST likely to roll out shortly, we fail to understand the logic of making the industry
go through the travails of excise regime. There are hundreds of items still outside the realm of excise, and the garment industry could well be one of those till such time GST is introduced.

For the above-mentioned reasons, we implore you to roll back the 10% excise on finished garments. The
textile industry is trying to get back on its feet after suffering a major setback due to escalating prices of
cotton. Levying the excise has not only resulted in greater torment for the industry members and has given
rise to mass unemployment. It is also feared among the industry associates that this excise has
given rise to increase in corruption & most important it has added fuel to the already flaring inflation fire.

It is our humble request on behalf of the entire textile industry of the country that you reconsider and
roll back the excise duty on finished garments at the earliest to safeguard us..

Thanking you in anticipation.

With respectful regards,

Yours truly,




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