EXCISE ON MANUFACTURING OF BRANDED READY MADE GARMENTS. CA. Rajendra Kumar P, FCA, Chennai

Transcription

1 EXCISE ON MANUFACTURING OF BRANDED READY MADE GARMENTS CA. Rajendra Kumar P, FCA, Chennai HISTORY OF TAXATION ON TEXTILE INDUSTRY : The levy of excise duty on the branded readymade garments is not new in textile industry. The Government of India, with an intention to broadenthe base of tax payers and reducing exemption levied introduced excise duty on the branded garments in the year Thereafter, the entire industry was under magnifying glass and taxed.this resulted into the political turbulences and issue of exemption notification in favour of the industry. However with a determination of tax reform in the country and to introduce a new levy Goods and Service Tax the Government has brought back its cart (policy) to tie a bull (textile industry). As a roadmap for the future tax; This change is inevitable. Hence the Government of India vide. Notification No. 11/2013 C.E.; 08/2013 C.E. brought back the levy in the following manner: ITEM without with garments / articles of cotton, not containing any Nil 6% other textile material in case of garments / articles of other composition Nil 12.5% CHANGE IN THE BUDGET : A. APPEND THE LIST OF ITEM UNDER LEVY Excise duty is being levied on readymade garments and made up articles of textiles; if all the following conditions are satisfied: The product falling under Chapters 61, 62 and 63 (heading Nos to 6308) of the Central Excise Tariff except those falling under 6309 and The retail sale price (RSP) of Rs.1000 and above The product bear or are sold under a brand name. This optional levy would apply to such readymade garments and made up articles of textiles regardless of the composition of the garment / article.

2 B. DUTY ON THE BRANDED READY MADE GARMENT ITEM Branded readymade garments and made up articles of retail sale price of Rs. 1, or more without with 2% 12.5% C. WHO IS LIABILE UNDER THE EXCISE LAW - Brand Name Owner : a. Who gets the goods manufactured on his own account on job work. b. Who gets goods, bearing its brand, manufactured from other manufacturers (normally small units) without providing the raw materials or inputs, and if the RSP is not affixed or marked on such goods when they are cleared in the course of sale from the factory of a manufacturer to the brand owner, then no excise duty would be payable by such a manufacturers since the RSP of such goods is not disclosed to them by the brand owner. However, since the process of labeling or re-labelling constitutes a process of manufacture, duty on the tariff value (based on the RSP) would be payable as and when the brand owner labels the goods with the RSP of Rs.1000 or above and clears them for further sale. - Other Manufacturer : Who manufactures goods bearing the brand name of another person out of inputs or raw materials which have been purchased independently and not supplied by the brand owner, does not satisfy

3 the definition of job-worker and would, therefore, have to obtain registration and discharge the duty liability - Job Worker : The brand name owner will be given the option to authorise his jobworker to pay the duty leviable on the goods. If such an authorisation is given, then the jobworker would have to obtain registration. D. CHANGE IN THE RATE OF ABATEMENT The tariff value for readymade garments and made up articles of textile is also being increased from 30% to 60% which shall apply to all goods mentioned in the notification No.20/2001-CentralExcise (N.T.) dated In other words, the levy is restricted to the tariff value of 60% on the RSP. E. SSI EXEMPTION - Brand Name Owner : a. The value of clearances for home consumption from one or more manufacturer from one or more unit should not have exceeded Rs. 4 crore in the financial year For this purpose, a certificate from a Chartered Accountant based on the books of accounts for shall suffice. b. The value of clearance for home consumption from one or more manufacturer from one or more unit should not have exceeded Rs. Rs.12.5 lakh for the month of March, 2016, subject to fulfilment of other conditions of the Notification No. 08/2003 C.E. dated c. The value for computing the eligibility as well as the exemption limit for purposes of SSI exemption would be the tariff value of the goods. - Other Manufacturer ( or ) Job Worker:

4 The SSI exemption under the Notification No. 08/2013 C.E. dated will not be available to them; since they are manufacturing someone else brand. F. DUTY ON STOCK ALREADY MANUFACTURED AND READY FOR CLEARANCE AS ON : Excisable goods which were produced on or before but lying in stock as on shall attract excise duty upon clearance. G. CREDIT : Manufacturers; who is not an SSI unit(i.e. has to pay excise duty on the clearance of it s stock lying as on ) shall keep a stock declaration of finished goods, goods-in-process and inputs as on in their records duly certified by a Chartered Accountant so as to enable the manufacturers to claim on inputs or inputs contained in goods lying in stock as already provided for in Rule 3(2) of the Credit, Rules, 2004, if he so desires. H. MECHANISM FOR ACCOUNTING SALES RETURN: a. Full exemption from Central Excise duty will be available to dutypaid goods returned to the manufacturer during a financial year up to an aggregate ceiling not exceeding 10% of the value of clearances for home consumption made in the preceding financial year. b. However the Manufacturer would be required to observe the following procedure; when its sales return crosses the limit prescribed above:

5 a. To submit an intimation within 48 hours of the receipt of the returned goods about the value of returned goods received in his factory/registered premises; b. To maintain proper accounts/record of the receipt, finishing operations, and dispatch of returned stock indicating the monthly and cumulative value of the returned stock received during the financial year and to produce the same as and when required. Notification No. 31/2011-C.E., dated 24th March, 2011 refers.