Apparel Sector Protests 10% Excise Duty on Branded Apparels

The apparel sector is vehemently opposing the imposition of a 10% excise duty on branded ready-made garments, a decision announced in the 2011-12 Union budget. Valued at ₹7,000 crores, the Indian branded apparel sector is expressing discontent, believing this move adds further strain to an industry already grappling with rising raw material costs.

Before this recent government declaration, the 10% excise duty was optional, with a 4% rate for cotton and 10% for other materials. However, the new mandate applies the 10% duty specifically to branded, ready-made garments, excluding tailored or made-to-order items for retail customers. This means manufacturers can avail credit for tax paid on inputs.

The garment industry is already under pressure due to increased prices of textile inputs, with raw cotton prices rising by 32% and cotton yarn prices by 23% compared to the previous year. Additionally, prices for man-made fibers, jute, and wool have also surged.

The Apparel Export Promotion Council (AEPC), representing around 7,500 Indian apparel exporters, strongly opposes the mandatory excise duty. According to Mr. Premal Udani, Chairman of AEPC, garment manufacturing's intricate production processes make it challenging to comply with such duties. He suggests that the government should have engaged stakeholders in discussions before proposing this levy.

Clothing is as essential item, and the new duty will only be passed on to the ultimate consumer. Apparel retailers express their insecurity by the way; the higher duty will be pushed on to the customers. Inside Fashion magazine reports Ashutosh Chakradeol, Head Buying Merchandising, Hypercity saying, "We are not sure if the duty is also applicable on private brands or only on national brands. But, in general, this is not an encouraging sign, as prices have already gone up by 20-25% due to the hike in cotton prices. On the top of that an excise duty will have an impact on the customer by 5-7%. It will have to be passed on and that is not a good sign".


Economic times reports J Suresh, Arvind Lifestyle Brands, and Retail MD & CEO saying, "Raw material prices are already at an all time high. Imposition of 10% excise duty leaves us with no other choice but to pass on the increased cost burden fully to the consumers,"


Clothing makers and retailers are looking for ways to handle the price rise. They are opting for a change in the product mix, introducing different price points, and also considering a price hike up to 8%. Some of them are even considering a 10% hike in apparel prices. Apart from the impact on the operating costs, retailers also fear a decline in the apparel sales.


Retailers expect the GST (Goods & Service Tax) to be implemented by April. Excise duty exemptions will be converted into a subsidy scheme in the proposed GST regime. Under GST, rate of tax remains same, but some goods are exempted, and the taxes paid while purchasing or manufacturing these goods, will be returned to the exporter. This is done to make the export market competitive. Retailers expect the Government to roll back the excise duty, till the implementation of GST.


References:


1)     Inside Fashion, Vol: 11, No2.

2)     moneycontrol.com

3)     economictimes.indiatimes.com

4)     hg.org/