`Kelkar proposals will hit spinning mills'

THIRUVANANTHAPURAM Jan. 3. Jacob Joseph, managing director, Kerala State Textile Corporation(KSTC), has said that the Kelkar committee recommendations on excise duty hike would seriously affect the spinning mill industry in the State.

In a statement here today, he said that the recommendation to hike excise duty on cotton yarn from 8 per cent to 16 per cent would be a setback to cotton mills.

He said that the Kelkar committee had recommended this new and uniform rate for cotton, polyester and other varieties of yarns in 2003-2004, followed by a reduction in phases to fix the rate at 14 per cent.

The recommendations would bring a windfall for polyester filament yarn and other synthetic yarn makers as it would end up in reducing the current excise duty rate of 32 per cent. On the obverse, the cotton mills would have to bear the burden of a duty hike.

He said that cotton yarn manufactures would not get the benefit of Cenvat Duty Credit since cotton was not taxable as it was unprocessed raw material. Being the first point of sale, the burden was on cotton yarn and there was no justification on imposing such a huge duty on cotton yarn, he added.

Owing to industrial slackness, the cotton mills were finding it difficult to take the burden of an 8 per cent excise duty rate. While the Kelkar committee had by and large recommended either a reduction in rates or a rationalisation of rates, its proposals to double the excise duty on cotton was not justifiable.

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