Finance Minister Arun Jaitley while presenting the budget in Parliament on February 29 had proposed a one percent excise duty on readymade garments worth Rs 1,000 and above. Textile companies have urged the government to roll back the proposed excise duty on branded readymade garments and continue with the ‘optional duty regime’ that applies currently, until the goods and services tax (GST) is introduced.

Rahul Mehta, president, Clothing Manufacturers Association of India said that once GST is introduced, the whole value chain will be covered by duty and traceability as well as compliance will improve tremendously and implementation problems will also ease considerably. Till then, the government must do away with excise duty.

The excise duty on finished products was an experiment implemented a few years ago by the previous government, which was withdrawn later as it was found impractical.

Mehta further added that they have in the past pointed out that the task of collecting this excise duty from the highly dispersed and mostly tiny units in the garment sector would be a formidable one for the government, especially when the rest of the value chain remains exempted and, therefore, traceability is a serious issue.

The introduction of the Rs 1,000 cut-off price point for the applicability of excise duty will further complicate and impact the sector. The large number of small and tiny units in the sector will also find it impossible to follow the procedures involved. The result will be that evaders will prosper and compliant units will suffer.