‘Saree’ out of excise duty ambit; brings cheers to textile traders | Policy News India » Page 2

‘Saree’ out of excise duty ambit; brings cheers to textile traders

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Saree

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The Indian saree, whether it is made of six metres of fabric or undergone a designer makeover with embellishments and embroidery, will not face excise duty now as the Government of India has declared that the saree won’t be classified as a ‘Ready-made Garment’, which would have attracted tax.

It may be mentioned here that branded ready-made garments and textile products with a retail price of over Rs. 1,000 attract excise duty at rates of 2 per cent or 12.5 per cent, depending on the use of input tax credit.

According to a Central Board of Excise and Customs (CBEC) circular, “Saree which has undergone further processing such as embroidery, stitching of lace and tikka, etc. and stitched with two or more kinds of fabrics will be classifiable as ‘Saree’ under Chapter 50, 52 and 54 of the Central Excise Tariff Act, 1985 depending upon the material of the fabrics, and not as made-ups under Chapter 63 of the said Act.”

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The circular further clarifies, “Each case may be decided on the basis of facts of the case and where further processing of ‘Saree’ does not change the essential characteristics of the fabric as that of ‘Saree’ , it should continue to be classified as ‘Saree’.”

It’s worth recalling here that in the Union Budget 2016, Union Finance Minister Arun Jaitely had imposed excise duty of 2 per cent on ready-made garments and made-up articles of textiles falling under chapters 61,62 and 63 of the Central Excise Tariff Act (CETA), 1985 and textile traders demanded to keep saree free from taxes.

It has been a matter of uncertainty for wholesale manufacturers as well as exclusive boutiques and designers because whenever a saree becomes a ready-made garment, it has garnered a number of tax disputes. Tax experts have said the clarification will ensure that sarees continue to enjoy exemption from central excise duty, which is extended to textile products.

 

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