In the Union Budget 2016-17, Finance Minister Arun Jaitley has proposed to bring in high-end readymade garments under excise duty net.
Jaitley proposed to levy 2% excise duty on branded readymade garments and made-up articles of textiles of retail sale price of Rs 1,000 or more. However, this duty will be applicable only for those manufacturers who do not claim input tax credit (ITC) popularly known as central value added tax (Cenvat) paid on various raw materials. Manufacturers who claim ITC, however, will need to pay 12.5% excise duty. Until now, excise duty was “nil” on manufactures without ITC claim and 6-12.5% for those who claimed ITC.