Friday, June 27, 2014

our humble request-excise on branded garment is not required

27.6.14 TO, THE HON'BLE UNION FINANCE MINISTER, LOK - SABHA, NEW DELHI.. RESPECTED SIR SUBJECT ; PRE- BUDGET MEMORANDUM SEASON'S GREETINGS ENTIRE KARNATAKA TRADE & INDUSTRY IS WITH ME IN CONGRATULATING YOU & OUR DYNAMIC PRIME MINISTER FOR SUPERB VICTORY WITH A THUMPING MAJORITY.. STABLE GOVERNMENT IS THE NEED OF THE DAY & WE ARE THANKFUL TO SRI MODI JI THAT TO PROVIDE INDIA A GREAT JOURNEY OF SUCCESS TOWARDS PROSPEROUS ECONOMY OF OUR COUNTRY , YOU HAVE BEEN GIVEN THE PRIME RESPONSIBILITY AS UNION FINANCE MINISTER..YOUR PAST RECORD AS A ABLE ADMINISTRATOR WAS QUITE ENOUGH FOR IT... Hope and trust that under your able guidance Indian economy will prosper further and further..what-ever reforms the Union Government is implementing will be fruitful for the trade & in ​It is with considerable shock and surprise that we have been reading reports in various Newspapers that the Finance ministry is considering making Excise Duty on Branded Garments compulsory once again. Whilst these are of course unconfirmed reports, it would not be out of place here to reiterate the disastrous impact of such a step, if at all being considered by the Government: 1. The definition of a “Brand” under Excise Laws includes any Garment, which has a name, or logo, or symbol or any other identification mark on the product or package. Since all Garments are sold with some label or the other, IT IS IMPORTANT TO NOTE THAT EXCISE WILL BE LEVIED ON ALL GARMENTS, AND NOT MERELY ON THOSE MEANT FOR THE RICH AND WELL OFF. 2. Since 80% of the Industry is still in the Small Scale Sector, this move will be a major deterrent to the survival and growth of these small manufacturers. 3. Every time Government has levied Excise on Garments in the past, we have seen that the growth of the Organized Sector has been adversely affected, as this sector cannot compete with the Unorganized Sector, which does not form part of the tax paying fraternity of the Industry. 4. Whenever Excise has been introduced, one has observed a shift to the Grey Market, with the Government losing out even on the other forms of taxes such as Income Tax, VAT, etc. 5. The assumption loss of Rs.1200 crores in Excise is a misconception, as the Industry is not enjoying any CENVAT benefits today. However, if Excise is made compulsory, manufacturers will also be entitled to take CENVAT Credit, which will reduce the Net collection to hardly Rs.300 to Rs.350 crores. 6. Nearly 50% of a Brand’s annual Sales are made at Discounted Rates, ranging from 30% to 70%. However, Excise Duty, which is levied at the time of dispatch from the Factory, is calculated on the full price. Therefore, the burden of Excise on the Consumer, is nearly twice than the intended levels. 7. For many of the International Brands coming to India, the current exemption from Excise Duty provides a huge incentive to them for increasing sourcing from Indian Manufacturers – as it is cheaper to source from India than import. However, with compulsory Excise, this advantage will be wiped out. INTERNATIONAL BRANDS WILL PREFER TO IMPORT THEIR REQUIREMENTS RATHER THAN MANUFACTURE IN INDIA, REDUCING OUR OWN MANUFACTURING AND EMPLOYMENT. 8. With the current Government’s emphasis on encouraging Manufacturing and Job Creation, this move is in complete contradiction, and will reverse the increasing focus on local manufacturing. ON ONE HAND WE ARE ALLOWING FREE IMPORTS FROM MORE AND MORE COUNTRIES AND ON THE OTHER HAND DISCOURAGING DOMESTIC MANUFACTURING AND JOB CREATION. 9. It has been seen that the Industry has moved to an Investment phase after a hiatus of 3–4 years, and this move will once again put a brake on such plans. INVESTMENTS MEAN JOBS. LACK OF INVESTMENT MEANS LACK OF JOB INCREASES. GST will be coming in 8 months, hence request to continue with optional system of excise for the intervening period. The textile industry is highly fragmented and un-organised – it would be very difficult for the industry to register and get acquainted with a new set of laws for just 8 months. The industry is paying VAT, hence they are well acquainted with how to function on similar type of tax system. Hence they are equipped to understand and comply with GST system as and when it comes. The industry is reeling due to low growth of consumption for textiles due to high inflation in food items, hence at this stage wont be possible to pass on the additional impact to the consumer. This would hit production and employment in the garment industry. The industry would stop growth, as they will not want to cross the threshold of excise limit and get into the net. Memories of the last time it was imposed, has put a big fear in the industry – they have paid huge fines and penalties for non-compliance of small issues, which they did not understand or have the capability to comply with. Bangladesh and Sri Lanka has duty free access to the country – the optional system gives domestic producers a shield which ensures that the local market isn't flooded by cheap goods from bordering countries who have a low cost structure. We will be happy to discuss these issues in person if there is need... ​kindly oblige garment trade and industry by not imposing the excise as earlier 2 times it was withdrawn due to negative impact...​ WITH KINDEST REGARDS SAJJAN RAJ MEHTA EX.PRESIDENT .KARNATAKA HOSIERY AND GARMENT ASSN BANGALORE CHAIRMAN..TAXATION COMMITTEE..KHAGA MEMBER..STATE TAXES COMMITTEE..FKCCI 09845501150

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