Most of the industry bodies like the the Federation of Indian Chambers of Commerce and Industry (Ficci), the Associated Chambers of Commerce and Industry (Assocham), Confederation of Indian Textile Industry (Citi) have suggested that the duty on MMF be halved to 8%. Speaking to FE, a senior textile ministry official said, "A change in the duty rate on MMF is being currently looked into by the government."
The finance ministry is at present perusing the pre-Budget proposals from various industry bodies that have been presented by the textile ministry. The textile industry has been demanding duty cuts on MMF as the duty structure results in accumulation of Cenvat credit with the spinners.
According to sources in the industry, the duty on MMF is 16% while spun yarn of MMF has an optional duty of 8%. Charging excise duty of 16% on MMF and 8% has led to an accumulation of huge Cenvat credit to the tune of nearly Rs 100 crore with the spinners, making spinning of MMF unviable.
Ficci and Assocham have also suggested that excise duty on inputs and capital goods for spun yarn manufacture should reduced to 8%. The excise duty on inputs and capital goods is currently 16% while the duty on finished yarn is 4% on cotton yarn and 8% on synthetic yarn. The value addition in yarns are usually in the range of 35-40% over the input costs, thus there is an unutilised Cenvat credit to the extent of Rs 4-6 per kg.
Similarly, the excise duty on inputs and capital goods is 16%, whereas the duty on finished texturised yarn is 8%. The value addition in texturising normally is in the range of 12% over the inputs cost resulting in an unutilised Cenvat credit to the extent of Rs 1.50 per kg which adds to the cost of production.
Industry players feel that cutting duty on MMF will reduce losses to the spinning mills by virtue of accumulated Cenvat credit and therefore will improve the viability and profitability.
