Indian garments frayed by excise duty

Indian garments frayed by excise duty

Bangladesh and Nepal gaining competitive advantage over India, says garments body.

The South India Garment Association (SIGA) on Tuesday urged the government to reconsider levy of excise duty on labelled garments in view of problems facing the industry like negative growth, devaluation of stocks, economic slowdown and underutilisation of production capacity.

SIGA President Kundan Jain said that the levy of excise duty has had a negative impact on the growth of the garment industry. “This requires urgent attention, as otherwise, it can adversely affect the industry. We request the government to reconsider the levy and its law before it is too late,” Jain said.

A delegation comprising SIGA associations from Bellary, Andhra Pradesh and New Delhi met the Union Finance and Textiles ministers and various ministry officials on Tuesday to request rollback of excise duty on branded garments.

The excise duty was first imposed in 1972 on garments and again in 2001, though it was rolled back on both occasions due to its negative impact on the garment industry, SIGA pointed out. However, it was reintroduced in February 2011.

SIGA secretary Anurag Singhla said that the definition of branded garments is wrong, as a garment does not become branded simply by the act of putting on a label to it. He said that a large section of the industry manufactures men’s casuals and formal wear for the mass market without adding any brand name labels, and they are out of the purview of excise duty.

“Labelled garments falling under the branded category are liable for excise duty, leading to unhealthy business practices. There is no specific definition of what constitutes a brand for garments. To bring branded garments under the excise purview is discrimination against a large section of garment manufacturers,” Singhla said.

Jain noted that smaller garments units which have worked as feeder units to bigger ones, have created numerous jobs for small families. “But after the excise duty levy, the big units are cutting down productions leading to the smaller units facing difficulties in getting orders,” Jain said.

SIGA Vice-President Praveen Bafna said that cheap imports from Nepal, Thailand and the bilateral trade treaty with Bangladesh for duty-free imports has hit the profits of the domestic garments industry. “There is no level playing field, resulting in mass exodus of manufacturing facilities from India to Bangladesh and considerable reduction in domestic industry jobs. Big brands have been procuring garments from Bangkok and Nepal, as also from Bangladesh,” Bafna said.

He said that a recent trade treaty with Bangladesh compounded the problems of the garments industry. “Now, small and medium garment manufacturers have started visiting Bangladesh to explore opportunities of procuring garments at lower rates, that too, import duty free.

In the interest of the domestic garments industry, as well as to save jobs, we hope that the excise duty is reconsidered,” Bafna said, adding that though the government has come out with various schemes for developing the garment industry, the imposition of excise duty is downsizing it.

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