New Delhi, Mar 1: Retailers are worried that demand for branded garments will take a further hit following an increase in excise duty on items worth over Rs 1,000 announced in the Budget as they would be forced to pass on the burden to consumers. “The two-fold increase in taxes on branded apparels is disappointing, as the apparel industry is facing slowdown due to global slowdown,” Future Retail Ltd Joint Managing Director Rakesh Biyani told.
He further said: “Due higher excise duty, domestic demand could be impacted, causing a double blow to the apparel manufacturers who are already hit by global slowdown.” Expressing similar views, Woodland MD Harkirat Singh said: “Last year market has slowed down and apparel industry has been under pressure. (Also Read: Union Budget 2016; Mutual Funds say lower deficit target will bring down cost of funds)
This increase in excise will lead to more problems. Our margins will be squeezed and we will be forced to pass on the cost to the customers.” Shoppers Stop Managing Director and Customer Care Associate Govind Shrikhande said: “Consumer demand which is already muted could get impacted further.” He further said the additional excise duty and increase in service tax to 15 per cent is likely “to impact consumer spending in the respective categories”.
Stating that prices of the branded garments will go up, Biyani said: “Considering higher costs and excise duty, overall there could be a price increase of 5-6 per cent.” Singh said the price increase could be from next season onwards as inventory for the upcoming summer season is already ready. In his Budget speech yesterday, Finance Minister Arun Jaitley had proposed change in excise duty on branded readymade garments with a retail price of Rs 1,000 and above to 2 per cent without input tax credit or 12.5 per cent with input tax credit from nil without input tax credit or 6 per cent/12.5 per cent with input tax credit.