INDIA BUSINESS WORLD - APRIL 2007
The Month that was ...

TEXTILE COMMITTEE CESS TO BE WRAPPED UP

THERE'S good news for the textile industry. The government is likely to scrap the textile committee cess. All textiles and textile machinery are likely to be exempted from the cess in a move aimed at improving global competitiveness of Indian companies and attract greater investments into the sector.

The cess, which is currently levied at 0.05% on ad valorem basis, was scrapped in the case of readymade garments in January this year. The textiles ministry has now sent a Cabinet note seeking exemption for textiles and textile machinery. The government had collected Rs 52 crore in 2005-06 through textile committee cess. Companies will save this amount and the benefit will be enjoyed by units manufacturing fabrics and other types of textiles, apart from textile machinery such as looms.

"Exemption from the cess will provide the textile industry financial relief and help generate more investment, employment and exports," a government source said. The exemption is also expected to boost production of textile machinery to meet the shortage of machines. Obviously, the government is looking at the long-term implications at the global stage where China's domination continues to grow while smaller players like Sri Lanka and Bangladesh are also posing stiff challenge to the Indian industry.

The cess was being used to fund the activities of the Textiles Committee, which provides testing and consultancy services to ensure quality standards. The committee also undertakes development-oriented activities. However, the industry had been demanding the abolition of the cess since collections were in excess of what was required to fund the committee's activities.

The staff manning collection of the cess would now be redeployed for other activities, such as strengthening textile testing facilities and consultancy activities of the committee. Total loss to the Centre due to the exemption is expected to be about Rs 35 crore annually, leading to a shortfall in the committee's receipts by about Rs 2 crore. The shortfall would be met by increasing the committee's revenue from its services and any further shortage would be met by grants from the Centre. The revenue generated by the committee through its services was about Rs 15 crore in 2005-06. The actual expenditure of the Committee during the same period was Rs 23 crore. The shortfall was more than made up for by a grant of Rs 15 crore from the Centre.