India Cuts Excise Duty

The government has set a zero excise duty on exports of cotton, spun yarn and apparel.

NEW DELHI — In a fillip to India’s fashion industry, the government has set a zero excise duty on exports of cotton, spun yarn and apparel. The move went into effect March 1.

Industry analysts said the decision could mean the price of ready-made garments could come down by as much as 7 to 8 percent, benefitting manufacturers, retailers and customers. The announcement was made as a part of the Union Budget for 2013-14 by finance minister P. Chidambaram, with other incentives to keep the textile industry growing.

The apparel industry, which has been suffering from a slowdown, had been lobbying for the removal of the excise tax. Designers and various industry people have been protesting the tax since 2010.

“The withdrawal of the excise tax on branded apparel is a recognition by the government of India that the multiplier effects of jobs created in the textile and apparel industry far outweigh the benefits gained from taxing this industry,” William Bissell, managing director of FabIndia, told WWD. FabIndia is one of the leading retail chains in India that employs textile workers and artisans across the country.

Designer Tarun Tahiliani said the abolition of the tax would give designers much-needed relief from additional bureaucracy. “The system is hugely chaotic, so there is a huge hidden cost to keeping these things off your back,” he said, adding that it was “a very good thing that this excise tax has been abolished. It was abolished a few years ago, then it came back and sometimes the procedure itself was more damaging than the amount of the tax.”

Designer Nikasha Tawadey said that the removal of excise duty “was very welcome, but it was a sign that the community needed to keep together on important issues. If you don’t have a strong enough voice they will keep squeezing you. Designers often wear many hats at the same time, unlike the European counterparts, we often have a lack of major funding and work as accountant, production manager and designer at the same time. We do have our share of woes, and could do with some government help,” she said.

Asked if the benefit of the tax removal would be passed along to the consumer, Tahiliani and several retailers said that with the spring pricing already done and at the stores, the matter would have to be taken under consideration before a decision could be taken, but was more likely to be reflected in prices later in summer.