Synthetic fibre producers demand abolishing of excise duty on Man Made fibres

Synthetic Fibre and Yarn producers in the country have urged the Union Ministry of Finance to abolish high Excise Duty of 12 per cent on the industry and bring it at par with the Cotton fibre and yarn which has zero duty for growth of the Indian textile industry and for achieving a larger share of the growing global market.

The Association of Synthetic Fibre Industry (ASFI), in a letter written to the Union Finance Minister as well as to the Union Ministers of Commerce & Textiles, has requested the Government to totally abolish the excise duty on all Man Made Fibres and filaments from current 12 Per cent to nil. As a major anomaly in excise duty structure between MMF and natural cotton fibre is affecting growth of the Indian textile industry and preventing it from achieving a larger share of the global market. It is this bias against man-made fibre and yarn that has left India far behind China in terms of investment, scale of manufacturing and exports.

During the PM's initiative of Make in India workshop held recently attended by the PM and his cabinet, the Textile Secretary in his presentation has asked for rationalisation of duties and taxes in manmade fibre as compared to cotton.

"India is one of the largest producer of man-made Fibres in the world with presence of large plants having state-of-the art technology. MMF textiles constitute almost two-third of the domestic textile market. However, India's share in global exports of value-added textiles of manmade fibres is miniscule at less than 3%. This has resulted in India's textile exports not growing beyond $40 billion out of which only 27% comes from man-made fibres. In contrast, China has given a big push to synthetic textiles and this has helped China in becoming the largest textile exporter of the world. Almost 80% of China's textile exports consist of synthetics." said Mr S.C.Kapoor, Director General, Association of Synthetic Fibre Association (ASFI).

According to letters submitted to the finance, textiles and commerce & industry ministries by the ASFI in the run to the Union Budget of 2015, the high excise duty on man-made fibre and yarn (in contrast to cotton and cotton yarn that are free of excise duty) has become a roadblock for the growth of the textile industry. Industry veterans and experts are also of the same view that the peculiar excise duty structure is holding up the Indian textile industry from achieving its potential. In contrast, major textile exporters like China, Thailand, Indonesia and Bangladesh tax cotton and synthetic fibres as well as yarn uniformly.

"The excise duty imposed on man-made fibre and yarn in India is 12% while cotton yarn and fibre are exempted from excise duty burden, leading to excessive bias against man-made fibres and yarn. This affects the textile industry in two ways. In the domestic market, poor consumers suffer as the least expensive polyester shirt or a saree made of synthetic fibre andis boughtat Rs.100 or Rs.150 suffers a huge excise duty burden of 12%. In contract, no excise duty is paid on the cotton fibre and yarn used to produce expensive cotton shirts bought by rich consumers at prices ranging above Rs.1,000.

Therefore, only the poor pay more tax on textiles in the domestic market while the rich are favoured with no excise duty on the premium cotton worn by them!" said Mr Kapoor.

"Correcting the excise duty anomaly in the textile sector has become vital now to attract more investment, step up production and boost exports through the 'Make in India' initiative. The recently-unveiled Textile Vision Document envisages growth in textile exports to $300 billion by 2025 as compared to $39 billion now. Reaching this goal would result in creating of 35 million additional jobs and require investment to the tune of $120 billion. Since this target would require flow of huge foreign direct investment (FDI) too, correction of the excise duty bias against synthetic textiles is essential. This will be a big boost to the Indian textile industry which accounts for about 17% of the country's exports, 6% of GDP, 14% of industrial production and generates employment for 35 million people," added Mr Kapoor.

If it is not possible to make man-made fibres and yarns duty free in one go, the government should at least usher in an uniform duty structure of bringing the entire textile chain under 6% excise duty. Industry estimates indicate that this will yield additional revenue of Rs.10,000 crore to exchequer. Also, this will create additional demand for synthetic textiles, boost investment, create huge employment and spur exports like never before – contributing handsomely to Prime Minister's 'Make in India' initiative. This will also pave way for a lower GST rate for textiles and easy transition.

Source : Equity Bulls

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