The financial year 2016-17 is knocking, and Finance Minister, Mr.Arun Jaitley has announced the budget. The budget hold quite a few changes for the textile industry on the whole. Let us understand it in details.

1. Budget 2016: Around Two-Fifths of the Readymade
Garment Industry to Face 2% Excise Levy
The financial year 2016-17 is knocking, and Finance Minister, Mr.Arun Jaitley has announced
the budget. The budget hold quite a few changes for the textile industry on the whole, but
the most glaring of them all is the proposal to levy excise duty of 2% on all readymade
garments as well as made up textile articles, the retail price of which are Rs. 1000 and
above.
While this move was uncalled for, as seen by the manufacturers as well as the branded
retail chains and other outlets, it is essential to understand that this duty is applicable only
on those manufacturers who do not claim the Central Value Added Tax (CenVAT) or the
Input Tax Credit on raw materials. However, manufacturers who did claim the Input Tax
Credit will be required to pay an excise duty of 12.5%. As of the current year, for
manufacturers without ITC claim, the excise duty was nil, and for those with claim it ranged
from 6 to 12.5%.
Mr. Rahul Mehta, the President of the Clothing Manufacturers’ Association of India (CMAI),
expressed his disappointment on the new levy given the fact that the industry is not going
great at the moment. Moreover, even the Goods and Services Tax is in talks and can be
implemented any-time soon, and hence the introduction of this duty makes all the less
sense.

2. The budget also brought along the proposal of making increase in the tariff value for
calculating Countervailing Duty (CVD) or excise from a fixed 30% to 60% for readymade
garments and made-up articles of textiles.
The excise duty on polyester staple fibre and polyester filament yarn has also been
increased from 6% to 12.5% for manufacturers who claim the Input Tax Credit. In this case,
for manufacturers who do not claim the Input Tax Credit, the duty will remain at the existing
2%. This will mean that over 40% of garments will now come under excise duty.
Thankfully, the customs duty on certain specific yarns and fibres has been reduced from the
existing 5% to 2.5%. In addition to it, the basic customs duty on the import of certain specific
fabrics have also been reduced to nil, however, only in the case when they are to be used
for manufacturing garments for the purpose of export.
While it not all seems rosy at the moment, the government’s goal to increase farm income
to almost double within the next 5 years will definitely benefit the industry in the long run.