Arun Kumar Singh, Advocate

Rajesh Kumar & Associates

Excise Duty on Ready Made Garments having Retail Sale Price (RSP) of Rs. 1000/- and above they bear or are sold under a brand name.

The Central Excise duty of 2% (without CENVAT credit) or 12.5% (with CENVAT credit) is being levied on readymade garments and made up articles of textiles falling under Chapters 61, 62 and 63 (heading Nos. 6301 to 6308) of the Central Excise Tariff except those falling under 6309 and 6310 of Retail Sale Price (RSP) of Rs.1000/- and above when they bear or are sold under a brand name.

These goods can be provided in two broad categories:

First, having Retail Sale Price (RSP) of Rs.1000/- and above when they bear or are sold under a brand name. The both condition having Retail Sale Price of Rs. 1000/- and above and are sold under a brand name should be fulfilled

Second, other than the above that the readymade garments and made ups which don’t fulfill the above two conditions. The other second category i.e. the optional levy of “Nil (without CENVAT credit) or 6% (with CENVAT credit)” in case of garments / articles of cotton, not containing any other textile material and “Nil (without CENVAT credit) or 12.5% (with CENVAT credit)” in case of garments / articles of other composition, as the case may be, shall continue.

On the first category, Central Excise duty has been levied with two options:

First option is to pay Central Excise duty at the rate of 12.5% with CENVAT Credit.

Second option is to pay Central excise duty at the rate of 2% without CENVAT Credit.

Though an option has been given to the manufacturers of pay excise duty only 2% without cenvat credit on 60% being the tariff value. In this case manufacturers shall not be allow to take cenvat credit on inputs and input services.

2% of the 60% Retail Sale Price (RSP)

Sl. No.SRP OF RS. 1000/-RS.
1.Abatement at the rate of 40%400/-
2.Taxable value at the rate of 60%600/-
3.Excise Duty at the rate of 2%12/-
4.Total Value of the goods1012/-

The maximum manufacturer of readymade garments who buy cloth from the market, the option of 2% excise duty on 60% of the value without cenvat credit shall be an easy to going method in general.

In this regard, the instructions issued vide Budget letter F.No.334/3/2011-TRU dated 28.02.2011, Instruction D.O. F.No.334/3/2011-TRU, dated 04.03.2011 and Instruction D.O. F.No. B-1/3/2011-TRU, dated 25.03.2011. The said instructions shall apply mutatis mutandis to the new levy. Salient features of these instructions [suitably modified for the proposed optional levy, as underlined] are as under:

(i) The levy shall not apply to retail tailoring establishments that stitch garments in a customized manner to the size and style specifications of individual customers, whether out of fabric purchased by the customer from the same establishment or fabric supplied by the customer.

(ii) The brand name owner, who gets the goods manufactured on his own account on job work, shall pay the duty leviable on such goods as if the goods were manufactured by him. The brand name owner (and not the job-worker) shall be required to register and comply with all the provisions of Central Excise law. Rule 4 (1A) of the Central Excise Rules, 2001 and Para 1, clause (vi) of notification No.36/2001-C.E. (N.T.), dated 26.06.2001 refers.

(iii) However, the brand name owner will be given the option to authorize his job-worker to pay the duty leviable on the goods. If such an authorization is given, then the jobworker would have to obtain registration. Proviso to rule 4 (1A) of the Central Excise Rules, 2001 and proviso to Para 1, clause (vi) of notification No.36/2001-C.E. (N.T.), dated 26.06.2001 refers. (iv) A unit which manufactures goods bearing the brand name of another person out of inputs or raw materials which have been purchased independently and not supplied by the brand owner, does not satisfy the definition of “job-worker” and would, therefore, have to obtain registration and discharge the duty liability.

(v) In cases where the brand name owner gets goods bearing its brand manufactured from other manufacturers (normally small units) without providing the raw materials or inputs, and if the RSP is not affixed or marked on such goods when they are cleared in the course of sale from the factory of a manufacturer to the brand owner, then no excise duty would be payable by such a manufacturers since the RSP of such goods is not disclosed to them by the brand owner. However, since the process of labeling or re-labelling constitutes a process of “manufacture”, duty on the tariff value (based on the RSP) would be payable as and when the brand owner labels the goods with the RSP of Rs.1000/- or above and clears them for further sale. 4

(vi) The value for computing the eligibility as well as the exemption limit for purposes of SSI exemption would be the tariff value of the goods. Explanation (C) to notification No.8/2003-C.E., dated 1st March, 2003 refers.

(vii) The SSI exemption for the month of March, 2016 will be Rs.12.5 lakh, subject to fulfilment of other conditions of the notification No.8/2003-C.E., dated 01.03.2003. For this purpose, notification No.8/2003-C.E., dated 1st March, 2003 is being amended suitably.

(viii) The eligibility for availing of the SSI exemption in 2015-16 for the month of March 2016 is that the value of clearances for home consumption from one or more manufacturer from one or more unit should not have exceeded Rs. 4 crore in the financial year 2014-15. The computation for this purpose shall be done in accordance with the provisions of Para 3A of notification No. 8/2003-C.E. For this purpose, a certificate from a Chartered Accountant based on the books of accounts for 2014-15 shall suffice.

(ix) Excisable goods which were produced on or before 29.02.2016 but lying in stock as on 29.02.2016 shall attract excise duty upon clearance. Manufacturers shall keep a stock declaration of finished goods, goods-in-process and inputs as on 29.02.2016 in their records duly certified by a Chartered Accountant so as to enable the manufacturers to claim CENVAT credit on inputs or inputs contained in goods lying in stock as already provided for in Rule 3(2) of the CENVAT Credit, Rules, 2004, if he so desires. No stock declaration, will, however, be required to be made to the jurisdictional central excise authorities.

(x) Full exemption from Central Excise duty will be available to duty-paid goods returned to the manufacturer during a financial year up to an aggregate ceiling not exceeding 10% of the value of clearances for home consumption made in the preceding financial year. The manufacturer would be required to observe the following procedure for this purpose:

(a) To submit an intimation within 48 hours of the receipt of the returned goods about the value of returned goods received in his factory/registered premises;

(b) To maintain proper accounts/record of the receipt, finishing operations, and dispatch of returned stock indicating the monthly and cumulative value of the returned stock received during the financial year and to produce the same as and when required.

Notification No. 31/2011-C.E., dated 24th March, 2011 refers. This facility has been provided since it is a common practice in this industry that the duty-paid stock cleared to the wholesale dealer/retailer on consignment basis that remains unsold is returned to the manufacturer either at the end of the season or from time to time. Such returned goods are cleared either as such or after „re-finishing‟ operations to another wholesaler or retailer for sale (often at reduced prices). The 5 re-finishing operations could involve cleaning, ironing, re-folding, repacking or relabeling, some of which constitute “manufacture” in terms of the relevant Chapter Notes. This facility obviates the need to pay excise duty twice on the same goods. Therefore the views expressed above are matters of opinion based on the laws common at the time of view being expressed, which may change as the law evolves time to time.

More Under Excise Duty

Posted Under

Category : Excise Duty (3860)
Type : Articles (10799) Featured (3634)
Tags : Budget 2016 (434) Budget Business (19)
  • Prashant Agrawala

    sir,

    What if an unit is making branded garments but the RSP/MRP is always below 1000/-. Does it need to take an excise registration and clear goods with Nil duty or no registration is needed.

    Thanks.

    Prashant

  • ankita mehra

    hi , so if iam a fashion designer, making only customised garments, excise duty is not required???also what are the practical difficulties that can follow in such case

    • If two conditions are fulfilled then excise duty will be applicable. One is brand name and another is price of Rs. 1000/- and above. You are manufacturing the own brand name then you are eligible for SSI exemption upto 1.5cr turnover. The ssi exemption will not be available for other brand name. for details you can ask your query on my email arunks03@gmail.com
      Thanking you,
      Arun Kumar Singh

  • Siddharth Adeshra

    Hi, I have a retail fabric store as well as a tailoring unit. Customers buy fabrics from my shop or get their own fabric and I get them stitched in a customised manner to the size and style of an individual customer.I also put my “name” label on the stitched garments. If i cross the exemption limit am I liable to register for Excise?

    • Two condition should be fulfilled for registered with central excise. One is goods should be branded and another is Retail Sale Price (RSP) should be of Rs. 1000/- or above.

  • Shivam

    what about the returned goods lying in stock as on 29/02/2016, actually these goods have already suffered nil rate of duty. Whether on clearance again duty should be paid on these goods?

    • Yes, duty will be paid at the time of clearance of excisable goods.

  • vishwas patankar

    What if goods below Rs.1000.00 are labelled and those above Rs.1000.00 are not labelled? Will excise registration have to be taken if turnover from such total sales exceeds Rs.1.50 CR?

  • vishwas patankar

    Further, how is turnover of Rs.150 lacs determined…is it pure and simple value of manufactured goods despatched, or is it the tariff value which is 60 % of the MRP of the manufactured goods?

    • Before registration the transaction value will be count for the purpose of SSI exemption upto 1.5 crore.

  • Gopinath

    What is the difference between MRP and RSP

  • rohit kapoor

    Resp. Sir,
    is this also applicable to exporters and Indian dealers who sell sarees etc. ethnic wear.
    Thankyou

    • Exporter and dealers are not required to registered with central excise in case of readymade garments.

      • rohit kapoor

        Thankyou Sir,But if manufacturing then it is applicable?

  • Tejas

    (v) In cases where the brand name owner gets goods bearing its brand manufactured from other manufacturers (normally small units) without providing the raw materials or inputs, and if the RSP is not affixed or marked on such goods when they are cleared in the course of sale from the factory of a manufacturer to the brand owner, then no excise duty would be payable by such a manufacturers since the RSP of such goods is not disclosed to them by the brand owner. However, since the process of labeling or re-labelling constitutes a process of “manufacture”, duty on the tariff value (based on the RSP) would be payable as and when the brand owner labels the goods with the RSP of Rs.1000/- or above and clears them for further sale.

    Respected Sir,
    In the above point, the last sentence, does not clarify if the label owner or the outsourced manufacturer will be liable to pay the excise duty on behalf of the Brand owner in case where labeling (barcoding) is happening at the outsourced manufacturer’s premise and then goods are being cleared/shipped to the brand owners premise. Please advice.

  • T.T. Industries

    (v) In cases where the brand name owner gets goods bearing its brand manufactured from other manufacturers (normally small units) without providing the raw materials or inputs, and if the RSP is not affixed or marked on such goods when they are cleared in the course of sale from the factory of a manufacturer to the brand owner, then no excise duty would be payable by such a manufacturers since the RSP of such goods is not disclosed to them by the brand owner. However, since the process of labeling or re-labelling constitutes a process of “manufacture”, duty on the tariff value (based on the RSP) would be payable as and when the brand owner labels the goods with the RSP of Rs.1000/- or above and clears them for further sale.

    Respected sir,
    In the above point, the last sentence, does not clarify if the label owner or the outsourced manufacturer will be liable to pay the excise duty on behalf of the Brand owner in case where labeling (barcoding) is happening at the outsourced manufacturer’s premise and then goods are being cleared/shipped to the brand owners premise. Please advice.

  • vishwas patankar

    If I am selling branded goods below Rs.1000.00 MRP and unbranded goods above Rs.1000.00 MRP FROM WITHIN THE SAME BRANDED STORE PREMISES, is excise registration in such case required?

    • The duty will be applicable on only branded goods and MRP should be 1000/- and above.

      • Nitin jain

        Dear sir, I have a brand of my own. In which shirts and tshirts are below the mrp of Rs. 1000 and pants and Jeans are above INR 1000. What will be the exemption given to me???

  • Hemant Pursnani

    Sir i am a retailer having my own branded storez in various cities. i get my goods manfactured in my label from vendors and mostly the mrp is more than 1000. Do i have to get registered with excise department.

    if so, do i have to declare goods prior to 29/2/2016 and pay excise on the entire above 1000 stock. if not then do i have to declare the stock i hold on the same date and pay excise on the same at the time of sale.

    Since i am a retailer , do i still have to pay excise on the final sale. i am a retailer ,a brand and sell 1000 mrp stocks.
    thanks

    • Anyone can pay the excise duty you or job worker. You should consult with any professional.

  • vishwas patankar

    What if branded as well as unbranded garments are stored in the same premises that has the name of the branded items…will the unbranded garments also be considered as branded and deemed to be sold as branded, and their sale will also add to the turnover? In that case if turnover exceeds 150.00 lacs is excise registration required?

    • Only branded garments will be count for the purpose of SSI exemption upto 1.5cr.

  • himanshu jain

    sir, plz tell me if any turnover limit on excise duty or it will be applicable from 0. I Mean my turnover is about to 60 lakh per year than when i have to apply for excise no. and how ever i have to charge in bill

    • The SSI exemption will be available for own brand upto 1.5cr but exemption will not be available for other brand name.

  • shikha

    Sir,
    I put my own brand and sell it to resellers without affixing the MRP. However my selling price to them is more than 5000/-. What will be the situation. My total domestic sale is Rs.60L in 2015-16 (1st year) and Rs.60L is export. In the year 2016-17 also it will be little higher than this. Do i need to take registration. If yes on what value I need to pay duty since MRP is not disclosed. The resellers can sell at any price.
    Shikha

  • SHAILENDRA LIMBANI

    Sir,
    I am manufacturer and doing 100% exports to Japan ( no local sales), cost of garment is less then 1000RS, and producing garment on foreign customer brand, my turn over is 6.8CR, in that case should i need to register with central excise and to obtain number?
    As local Central Excise office is pressuring us to get registered with them, what should we do?

  • SHAILENDRA LIMBANI

    Sir,
    We are manufacture of ready made garments and doing 100% exports to Japan, we our product value is less then Rs.,1000/- and we are using foreign customer labels and tags ( we have not used our brand ) and my exports turnover 6.8 cr. we have no local clearance but only exports in that case should we need CE registration?

  • Neeraj Sawhney

    Is excise registration required on readymade garment with brand name but not putting MRP and the turnover is more than 1.5 cr?

    • The brand owner will be liable to pay central excise duty when putting MRP by anyone.

  • sunil shah

    sir
    as i am not selling goods above mrp of rs 1000
    but my sell is more than 1.5 crore
    then i have to take Ce registration
    my turnover was also less then 4 crore in fy2014-2015
    and also less than 20lakh in march 2016
    sunil shah

    • The registration is not required if MRP is less than of Rs. 1000/-.

  • Rajesh Guzzar

    sir, my turnover last year 1.35 crore , for readymade garments & this year appox. 3.00 crore, please confirm applicable for excise registration.please confirm we have manufacturer some ( branded ) items manufacturer mrp 1299.00,please confirm excise applicable or not.

    • Branded garment MRP of Rs. 1000/- and above the excise duty will be applicable after turnover of 1.5cr. If other brand name then SSI exemption will not be available. You need to pay excise duty from first day.

  • Vikram Vohra

    Sir,
    am a manufacturer of customised uniforms.
    the companies that we make for get the garments/uniforms made for their own consumption and not sale/resale.
    There is no retail price and no MRP on the garments when we supply to them.
    do we need to take excise number?

  • Vinay Balani

    I have just started manufacturing readymade garments with a brand name. I manufacture some articles with RSP less than Rs.1000 and some articles with RSP more than Rs.1000. Total turnover this year is not likely to go over Rs.1.5 crores but next financial year may go above the limit of Rs.1.5 crores.

    Please advise whether I have to pay excise and get registration this year ?

    • CA Neeraj Bansal

      YES. REGISTRATION IS REQUIRED.

      CA NEERAJ BANSAL
      9718046555

  • Vinay Balani

    I have just started manufacturing readymade garments with a brand name. I manufacture some articles with RSP less than Rs.1000 and some articles with RSP more than Rs.1000. Total turnover this year is not likely to go over Rs.1.5 crores but next financial year may go above the limit of Rs.1.5 crores.

    Please advise whether I have to pay excise and get registration this year ?

    • No need to registered under Central Excise and no need to pay duty upto 1.5cr.
      Regards,
      Arun Kumar Singh,
      9818350318