While cotton is exempted from excise duty, MMF attracts 8% levy. The differential treatment is also visible further in the value chain
Making out a strong case for tax parity between cotton and man-made fibre, the textile ministry will soon take the draft national fibre policy to the Cabinet, reports PTI.
"We will go to the Cabinet as quickly as possible... Yes, definitely next month," textiles secretary Rita Menon told PTI.
In the draft policy, the ministry expressed concern over the "historical discrimination" between man-made fibres (MMF) and cotton in terms of taxation.
While cotton is exempted from excise duty, MMF attracts 8% levy. The differential treatment is also visible further in the value chain.
MMF textiles attract an excise of 8%, but cotton textiles have an optional duty of 4%.
"Any reduction in excise duties on MMF and MMF textiles will have a highly positive impact on the growth of MMF consumption," the draft policy, which has been put in the public domain, said.
Ms Menon said that the draft Cabinet note would be circulated for inter-ministerial consultations in the next few days and the process would be completed by the end of this month.
The ministries of agriculture, chemicals and commerce would be involved in the consultation process.
"Given that the future demand is expected to be largely in favour of man-made, fibre-based textiles, special attention is required to boost the consumption and production of man-made fibres in India," the draft said.
In the $63-billion Indian textiles industry, man-made fibre accounts for 41% of fibre consumption, while cotton accounts for 51%. In comparison, the ratio of man-made fibres to cotton consumption globally is 60:40.
The global fibre consumption trend is likely to further tilt in favour of man-made fibres on account of limitations in the growth of cotton production worldwide due to limited availability of land for cultivation, it said.