The readymade garment industry is perturbed by the latest budget proposal to convert the optional excise duty regime for readymade garments into a mandatory route at a unified 10 per cent rate for branded garments and made-ups.

The proposal is aimed at bringing the branded readymade garments under the excise net. Earlier, the excise duty on branded apparel was voluntary.

Ashish Dikshit, President, Madura Fashion & Lifestyle, said “The Finance Minister's move has come as a huge setback for the apparel industry. The industry has been under tremendous cost pressure in the last one year due to unprecedented rise in raw material prices. It has already resulted in price increases ranging from 15 to 20 per cent in this period. Global cotton prices have continued to show an upward trend, and may result in further cost increases in the coming season. This is going to hurt consumers at a time when they are already reeling from inflation on all basic necessities.''

Premal Udani, Chairman, Apparel Export Promotion Council (AEPC), said, “under the new regime, though Cenvat credit of inputs and services would be available and exports would continue to be zero rated, the factories have to register themselves with Central excise, increasing the net transaction and administration costs. This will severely impact industries with high requirements of outsourced processing and other services such as knitwear industries, embroidered or other value added segments.''

With the new regime, according to AEPC, garment exporting units in Tamil Nadu and West Bengal will be badly hit. Tamil Nadu, as a whole, provides around one-fourth of India's garment exports. Given the complex value chain, it is requested that the garment export industry should be provided with the optional excise duty regime as given earlier to protect large number of units.

Confederation of Indian Textile Industry (CITI) Chairman Shishir Jaipuria felt that the new regime would not only have serious adverse impact to these highly labour intensive segments but would also have significant operational problems at the level of implementation.

According to Mr. Dikshit, the apparel industry was just beginning to recover from a deep recession. “The latest proposal will result in an increase in the garment cost by another 10-15 per cent. In an industry suffering from high retail and input costs, and with low operating margins, such increases will be difficult to absorb, ” he said.

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