Latest Expert Exchange Queries

GST Demo Service software link:
Username: demouser Password: demopass
Get your inventory and invoicing software GST Ready from Binarysoft
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Popular Search: articles on VAT and GST in India :: ARTICLES ON INPUT TAX CREDIT IN VAT :: cpt :: due date for vat payment :: form 3cd :: list of goods taxed at 4% :: TAX RATES - GOODS TAXABLE @ 4% :: VAT RATES :: TDS :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: ACCOUNTING STANDARDS :: empanelment :: ACCOUNTING STANDARD :: VAT Audit :: Central Excise rule to resale the machines to a new company
« General »
 India’s GST among most complex in world, and it is 0% tax rate that is hurting the idea
 Can’t overrule courts with retrospective amendments, says Supreme Court
 Why tax planning should be an all-year round activity
 8 financial tasks you should do in the next 30 days
 Income Tax department may defend CPC in returns fraud case
  Income tax department sends notices to investors over tax treaty gains
 Seven months after GST rollout: Time for handholding over, Centre to intensify efforts to curb tax evasion
 Individual angels may get tax relief too
 The differences between tax and cess
 Startups that raised funds from angel investors face tax scrutiny
 Tax collection assumptions in India's budget ambitious

An efficient tax administration will solve
August, 04th 2009

Textiles sector is one of the largest employment providers in India. This sector also contributes very significantly to our export earnings. Any decline of textiles consumption or in exports causes serious concern and raises issues of policy ramifications.

The tax policies no doubt have their impact on cost of production, prices, domestic consumption and exports. Textiles has had a chequered history of excise duty changes.

Take only a few leaves from the history. In the Budget 1996-97, in an attempt rationalise the 'lopsided' tax structure, the government imposed basic excise duty at the fabric stage in order to capture value addition and also brought them under the Modvat (now called Cenvat) credit scheme.

Till then, textile fabrics had attracted only additional excise duty in lieu of sales tax. In Budget 2003-04, the handlooms and powerloom sector were also brought in the Cenvat chain.

However, the very next year, the then finance minister changed the entire complexion of duty structure by introducing an optional excise duty scheme for textile fabric producers. The optional duty regime has continued since then.

But in the meanwhile, the across-the- board reduction in the Cenvat rate by 4 percentage points in December 2008 followed by 2 percentage points in February 2009, caused peculiar implications for cotton textiles. Excise duty on cotton textiles got reduced to zero. Perhaps it was not so much by design than by accident.

For those exporters who were paying optional excise it meant denial of input duty refund, thus reducing their competitive strength. It is only to "rectify the situation" that the recent Budget restored the optional rate of 4% for cotton textiles beyond the fibre stage.

Cotton textile exporters who would again opt to pay excise duty can get refund of Cenvat paid at the input stage. The move should therefore benefit this category of exporters. For others, there is no change-the status quo continues. And to be sure, most exporters fall in this category.

In the budget, Cenvat on textile intermediates DMT, paraxylene and acrylonitrile has also been increased from 4% to 8%. The increase follows the policy to bring 4%-rated commodities in the mainstream of the mean Cenvat rate of 8%. Apparently, the increase is necessary to catch with the GST rate, which the government is keen to introduce by April 1, 2010. These intermediates are used for making synthetic and blended fabrics.

Though global meltdown seems largely the culprit for decline in the textile exports, arguably the decline raises suspicion that any increase in excise duty on inputs might hit exports.

But, at least the text book explanation has it that this by itself should not affect exports in as much as manufacturers who opt to pay duty would get reimbursement through rebate/ Cenvat input credit. Others, who opt to remain outside the Cenvat chain, would get compensatory relief through schemes like duty drawback.

Of course, the caveat is: an efficient tax administration. Exporters are generally aggrieved that under the current indirect tax regime, all the taxes and duties are not fully rebated. The government, however, claims that it has put numerous export incentives schemes to neutralise the effect of duties on inputs and finished goods. Perhaps only a comprehensive VAT or GST could narrow down the differences.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Careers

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions