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Garment units in a fix over confusion in GST rates on job work

Seek assurance that job work done after fabric is made into garment will attract 5% GST, not 18%

T E Narasimhan  |  Chennai 

textile industry, GST
The GST Council on June 11 said tax on services by way of job work in relation to textile yarn and fabrics had been brought down to 5%, but the sector suspects it could fall in 18 per cent bracket.

Claiming that the the confusion over tax rates on job work on has not been addressed, the has knocked the doors of the Ministry, seeking a clarification on the issue.

At the June 11 meeting, the Council had said that services by way of job work on textile yarns (other than man-made and filament) and textile fabrics would be brought down to five per cent from 18 per cent

But the textile sector thinks that processes such as stitching, printing, embroidery might still attract 18 per cent, not five per cent. Their reason for their worry these processes come into play after the fabric is converted to a garment.

A senior industry representative from says this confusion has arisen because the notification calling for a reduction in the rate from 18 per cent to five per cent stops at the fabric level and is silent on the rate applicable on job work carried out on

Exporters Association has made a representation urging the government to clarify the actual rate applicable to such job work.

Confederation of Indian Textile Industry's (CITI's) Chairman, J Thulasidharan said that the industry is apprehensive about the made-up and garment sector, as the job work on these still comes under the 18 per cent tax slab.

"This will have a serious implication on the cost of the final goods of made-up and garments, rendering them uncompetitive in the domestic and international markets," he said, adding that these products ought to be brought under the five per cent slab.

Specialty textile fabrics like impregnated, coated, covered or laminated remain under the 12 per cent slab which is unsustainable and will have huge bearing on the final cost, Thulasidharan said.

GST transition pangs: Confusing times ahead for retailers, consumers
The Confederation's unfulfilled demand of reducing on man-made fibre and yarns to 12 per cent or refund of inverted tax at the fabric stage will be a win-win situation both for industry and Government once implemented, Thulasidharan said. It would enable textile manufacturers to absorb the cost and the government not lose out on revenue either.

As an alternative, the industry suggested that if the government is unable to revise the MMF rates, then it must allow refund of unutilised credit accumulated at the stage of fabric manufacturing to the extent of five per cent. This has been provided for under the Act, where Council has been empowered to recommend the refund of unutilised credit under inverted duty structures.

First Published: Wed, June 14 2017. 02:08 IST