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Textile industry is hoping that the GST Council, which is expected to meet on Sunday would consider reducing GST rate on man made fibre, filaments and yarn to 12 per cent from the proposed 18%. The state association said independent weaving units may have to incur additional cost of over Rs 2 lakhs per annum.
The Council also has decided not to allow refund of accumulation of input tax credit at fabric stage that attracts only 5 per cent GST rate.
M Senthilkumar, chairman, Southern India Mills' Association (SIMA) hopes GST Council tomorrow would also include garments, made-ups and other sewn products related to job work under five per cent GST rate of service tax.
He said there will be 'huge' accumulation of excess credit with 18 per cent GST rate on yarn and only five per cent GST 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 powerloom sector.
An independent weaving unit having around 50 looms and producing 100 per cent viscose fabric would incur an additional cost of over Rs 2 lakhs per annum if 18 per cent GST rate is imposed.
Senthilkumar said that even with 12 per cent GST rate on yarns, the additional cost would be Rs 1.3 lakhs per loom per year and this will create an unhealthy competition between the composite and independent weaving units.
SIMA said the differential rates and non-refund of accumulated input tax credit would not only affect the industry, but also lead to wrong declaration 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 fabric stage to protect the interest of power loom sector and also meet the clothing needs of economically backward masses of the nation with reasonable tax burden.