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Textile industry hoping rates will be reduced to 12%

The textile industry is hoping that the GST Council would consider reducing GST rate

T E Narasimhan  |  Chennai 

Textile industry, gst
Textile industry

The is hoping that the Council, which is expected to meet today, would consider reducing rate on manmade fibres, filaments and yarns to 12 per cent. It feels that the independent weaving unit may have to incur additional cost of over Rs 2 lakh per annum.

At the 16th Council meeting on June 11, 2017, it was announced that 18 per cent would be the rate for manmade fibres, filaments and yarn. The council has also decided not to allow refund of accumulation of input tax credit at fabric stage that attracts only 5 per cent rate.

M Senthilkumar, chairman, Southern India Mills’ Association (SIMA), said that the is hoping for the Council at its meeting held on Sunday that it would consider the representations and reduce the rate on manmade fibres, filaments and yarns from 18 per cent to 12 per cent and also would include garments, made-ups and other sewn products related to job work under five per cent rate of service tax.

He has stated that there will be “huge” accumulation of excess credit with 18 per cent rate on yarn and only 5 per cent rate and non-refund of accumulated input tax credit at fabric stage. He said that this would significantly increase the fabric cost and seriously affect the independent spinning and weaving units, including the powerloom sector.

He added, even with 12 per cent rate on yarns, the additional cost would be Rs 1.3 lakh per loom per year, thus creating an unhealthy competition between the composite and independent weaving units.

He has stated that the government could have classified the entire textile value chain under 5 per cent rate to avoid such problems or refund the accumulated input tax credit at every stage so that the cost is not increased, a level playing field is created and proper compliance is ensured.
SIMA said the differential rates and non-refund of accumulated input tax credit would not only affect the industry, but also lead to wrong declarations and corruption.

SIMA urged the government to discourage any loophole for wrong declaration and corruption and pleaded for refund of accumulated input tax credit at the fabric stage to protect the interest of powerloom sector and also meet the clothing needs of poor masses of the nation with reasonable tax burden.

He further appealed to the Council to include garments, made-ups and other sewn textile products job work under 5 per cent rate for service tax, as these segments create 100 to 150 jobs per crore of investment, ensuring large-scale employment for the rural masses, especially women folks.