The Hindu : National : Mandatory Cenvat goes, two options for textile sector

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Friday, Jul 09, 2004

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National

Mandatory Cenvat goes, two options for textile sector

By Our Special Correspondent

NEW DELHI, JULY 8. The Union Finance Minister, P. Chidambaram, today sought to address the controversy over the inclusion of handloom and powerloom sectors under the Cenvat regime last year by announcing the withdrawal of the mandatory Cenvat duty. Instead, there will be a new tax regime for the textile sector.

Giving details of the new tax regime in the Budget proposals, he said there will be no mandatory excise duty on pure cotton, wool and silk, whether it be fibre, yarn, fabric or garment, while for blended textiles and pure non-cotton (polyester, viscose, acrylic and nylon), there will be a different tax regime. The mandatory excise duty on manmade staple fibre would be levied at 16 per cent, on polyester filament yarn (including textured yarn) at 24 per cent and on other manmade filament yarn (including textured yarn) at 16 per cent.

Every manufacturer — be they of handloom or powerloom or composite mill — will have the option to choose between two routes. One will be the exemption route and the other the Cenvat route. Under the exemption route, no excise duty will be payable at any stage except on manmade fibre and filament yarn. Under the Cenvat route, credit can be taken for all excise duties paid earlier.

For the pure cotton sector, the applicable excise duty rates would be a uniform four per cent on yarn, fabrics, garments and made-ups and for the blended textiles sector and pure non-cotton sector; it would be a uniform eight per cent.

Expressing the hope that handloom and powerloom weavers would welcome the new regime, he said there was also no cause for worry for the composite mills. For, they were now free to take the exemption route.

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