May 24: Last October, when the excise commissioner started informally collecting an excise duty of Rs 1.5 lakh per month per working chamber of a stentering machine from the fabric processing units, little did one think that it could be a major source of excise revenue while proving to be a measure to plug tax evasion.According to sources, excise collection from Surat increased by a whopping 30-35 per cent during 1997-98 because of this levy based on the stentering machine. A stentering machine is the last machine through which the fabric passes during processing and is a must during the process because it stretches the fabric to remove creases and straightens it for rolling and packing. Every process house has to have this machine which would ensure the tax base and there will not be scope for evasion.
According to figures available with the office of the textile commissioner, there are about 12,400 processing factories of which around 10,000 are hand processors. Assuming one stentering machine perprocessing factory, there will be at least 12,000 chambers in process. At an excise duty of Rs 1.5 lakh per working chamber per month or Rs 18 lakh per annum, the total revenue collected through this route would be a whopping Rs 2,160 crore.
Given that the units which have been paying higher than Rs 1.5 lakh per month, will pay higher but those who managed to evade will be caught in this net of minimum compulsory tax. And the total excise collection would not be less than Rs 2,500 crore as against an estimated current collection of around Rs 1,145 crore from the decentralised processing sector.
According to Indian Cotton Mills Federation (ICMF), this unorganised sector has been evading excise to the tune of Rs 3,500 crore as against the official estimate of Rs 2,000 crore. The federation suggests a reduction in the excise duty rate on fabric which is likely to result in a loss of Rs 1,340 crore in excise collection. By extending minimum duty norm of Rs 1.5 lakh per month per working chamber of stenteringmachine, the additional revenue would be Rs 1,990 crore, according to ICMF. This means that there will still be a net increase of Rs 650 crore in excise collection.
However, the decentralised sector, which contributes about half to the total fabric production, is likely to be affected in view of recession that has hit the small units badly.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
