• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

G. Gurumurthy

The units producing for the local market are faced with the unpleasant task of hiking the end price of their product to the extent of the new excise rate they will suffer.

COIMBATORE, March 3

THE proposal to bring cotton knitted fabric under the excise net by the Finance Minister, Mr Jaswant Singh, in his maiden budget has put the Rs 2000-crore Tirupur cotton hosiery producers, hitherto not paying excise duty, in a tight spot.

The cotton hosiery units catering to the domestic market production or selling basic knitted inner-wears for what they call the`local' market would be entering the excise department's records for the first time.

Naturally, this will cause upheavals in the Tirupur market over the next few weeks as the pricing of cotton hosiery wear will come under immediate stress.

Unlike the knitwear exporting units whose export production is entirely non-exciseable, the knitwear units selling their hosiery goods, predominantly the cotton innerwear for the domestic market, are to now pay excise duty and clear grey knitted fabric at fabrication stage itself. The units producing for the local market are faced with the unpleasant task of hiking the end price of their product to the extent of the new excise rate they will suffer.

The Union Budget for 2003-04 in the process of completing the `cenvat' chain for the textile industry has withdrawn the excise duty exemption hitherto available to the knitwear industry and made excise duty payment compulsory (as per the Budget proposal, all the cotton knitted fabric and garments would attract 8 per cent excise duty). While it is not yet clear on what extent the new levy would impact on these cotton hosiery units' working or how the Central excise authorities would set their revenue collection mode for the Tirupur units (because of the multiple stages of knitwear production processes), the initial reaction from the basic hosiery wear producers of Tirupur on the new Central levy is one of disenchantment on the Government move.

The owners of most of these inner garment units are also not sure on the exact rate of excise duty their products would attract. The confusion is partly due to the Budget announcement of a rate of excise duty for cotton knitted fabrics and garments at 8 per cent and for all the woven fabric and other knitted fabrics and all the garments at 10 per cent. Tirupur knitwear producers catering to the local market do produce blended garments and apparels along with 100 per cent cotton wear.

"We are yet to recover from the suffering caused by the compulsory `C' form based trading introduced since April last insisted under the Central Sales Tax (CST) Act for all our inter-State transaction which required both the knitwear producers and their buyers in the local market to have the CST registration to claim the CTS rate." "Since bulk of the Tirupur's basic innerwear are sold to trades outside Tamil Nadu and most of them do not have valid CST registration, Tirupur producers were to bear 10 per cent sales tax for transaction without the CST registration. Now added to this is the Central Excise duty at fabric stage and the knitted garment which will only worsen our plight," said a leading player in the branded knitted inner garment producer in Tirupur pleading anonymity.

"Basic knitted innerwears such as vests and briefs produced are low valued items where the consumers are very sensitive to price. This being the case, I wonder how my consumers and dealers would react to the new duty incidence, which we have to pass on to the buyers," he lamented.

Above all his worry is the process of excise collection that will unfold in the days to come from the Central Excise authorities. "From the hosiery yarn stage up to the garment finishing, the product undergoes at least five to six stages of manufacture, each stage being independent of the other and is owned and operated by different companies, mostly under job-work basis. How the excise collection mechanism would deal with these stages," he feels. The volume of the Tirupur's basic knitted innerwear production is guesstimated to be around Rs 1000 crore to Rs 3000. But traders agree that out of this hardly 25 to 30 per cent are transacted through the CST registration route. This being the scenario, it remains to be seen how the excise department would bring the decentralised Tirupur knitted innerwear garment producers in their revenue mop.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Law reforms panel proposes passbook for agriculturists

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line