Panel for duty cut on 40 textile machinery items

NEW DELHI: The task force appointed by the prime minister to suggest measures necessary to complete the ongoing tax structure recast in the textile industry, is likely to propose a reduction in import duty on about 40-odd garment machinery items from the existing level of 25% to 5%.
In its report to be submitted to the prime minister by September-end, the task force, headed by textile secretary S B Mohapatra with a mandate to fulfil the unfinished agenda of the N K Singh Committee, will also attempt a relook at the Cenvat rates and exemptions applicable to various segments of the textile industry.
As the task force report is being readied, the textile ministry however apprehends that the recently appointed Kelkar Committee’s mandate would subsume its role.
“The terms of reference for the Kelkar panel are not yet known. If there is overlapping of mandates, the textile ministry would ask for merger of the two to avoid any conflict in views,� a senior ministry official said.
The ministry is also wary of an announcement of the finance minister, Jaswant Singh that he would unveil incentives for independent power processors.
The excise duty exemption to these processors had been misused for tax evasion by other segments of the industry and the exemption was therefore withdrawn in last budget.
“If what the finance minister has meant is to restore the status quo ante, it would suffice to derail the whole process of fiscal correction in the textile industry,� officials said.
The exemption to independent power processors had been a source of corruption and misuse by other unintended beneficiaries. The annual evasions were to the tune of Rs 3,000 crore.
In the last Budget, the tax structure for textile industry saw an unprecedented overhaul with the cuts in import duties on a bunch of capital goods.
The duties were slashed from a level of 25-30% to a range of 5-10% for various items. The fiscal revamp was carried out as per the recommendations of the N K Singh Committee which had offered solutions to the gross anomalies that crippled the industry for the last many years. The task force’s brief is to complete the unfinished agenda of the Singh Committee
Having received a plethora of suggestions from various industry associations, the task force has also decided to propose that knitwear and powerlooms sectors be brought under normal cenvat rate of 16%.
In budget 2002, woven and knitted grey fabrics were brought under a voluntary duty of 12%. Processed cotton knitted fabric and knitted garments had too been brought under the 12% optional duty.
The Task Force has also worked out a formula to make cenvat assessment simpler for the decentralised sector, sources said. The fiscal restructuring initiated in the Budget has imparted vigour to the industry, as can be seen from the rise in stock prices of many leading organised textile mills during the past five months, the sources said.
The task force comprises finance and commerce and industry ministry officials and representatives from CII textile committee and the National Council for Applied Economic Research.