In the union budget 2011, Government has introduced Central excise duty on BRANDED readymade clothes. The tax rate is 10% on 60% of the retail price with CENVAT facilities. This move is unwelcomed as the textile industry is already suffering from high yarn price and with special reference to Tirupur, dyeing problem. This will make the textile products dearer and will discourage consumption.
These changes are resulting into following effects. (source: http://www.caclubindia.com/articles/central-excise-duty-assessment-on-ready-made-garments-8943.asp )
1. Unbranded ready-made products are exempted from duty. However, the manufacturer at his option, can pay duty @5% on cotton items and 10% on other items, with Cenvat facility.
2. Branded readymade garments shall attract a duty @10%, with cenvat facility.
3. Duty is to be paid on a tariff value equal to 60% of the retail sale price.
4. The duty liability can be discharged by either the job worker or principal manufacturer.
5. These changes shall be effective from 01.03.2011.
6. Textile and Textile product is being removed from the schedule of Additional Duties of Excise Act. Now there products will be subject to State's Value Added Tax.