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Industry wants excise duty parity in manmade, cotton fibres next Budget

As uncertainties over actual date of rollout of GST persists, the textile industry has urged the government to bring parity in the excise duty structure of manmade and cotton fibres in the coming Budget itself. The suggestion was made at a pre-Budget meeting with finance minister Arun Jaitley . The industry was under the assumption that with the introduction of the GST regime, its demand for erasing the duty gap could automatically be addressed. However, with the Centre and states yet to iron out differences on several sticking points, experts have ruled out the introduction of the new indirect tax regime at least before September next year.

The industry has been demanding a reduction in the excise duty on manmade fibres claiming that such a disparity was preventing domestic synthetic fibre producers from scaling up operations. The huge duty difference has ensured that India’s textile market remains cotton-driven, in a stark contrast with the trend globally, apart from eroding the country’s export competitiveness in the manmade fibre segment.

OP Lohia, Chairman of Indo Rama Synthetics observed since GST is unlikely to come in before September, the government should, at least, cut excise duty on manmade fibre to 6 per cent from the current 12.5 per cent. It would also set the stage for the levy of a 5 per cent duty for both cotton and man-made fibres under the GST regime, as many are expecting, he said. Synthetic fibre is a poor man’s necessity, as cotton fibre is more expensive. 

The excise duty on manmade fibres, which was as low as 4 per cent in 2009-10, was raised by the previous government. This came as a shocker to synthetic fibre producing companies that had invested much in expanding capacity to cater for growing domestic demand for manmade fibre, Lohia added.