Textile exporters seek GST exemption to boost presence in global markets

The GST Council has finalised between 5% and 18% of applicable IGST on various products

Textile exporters have urged the government to exempt the sector from the integrated goods and services tax (IGST) to boost the country's exports as they fear that Indian products will become uncompetitive in global markets.  

The GST Council has finalised between 5 and 18 per cent of applicable IGST on various products depending upon the type, value and services involved in it. Additionally, 5 per cent GST is applicable on job work also.

"Merchant exporters cannot benefit from the facility of exports under bond / LUT (Letter of Undertaking). There is no enabling document prescribed so far by the government under which goods can be cleared by a manufacturer without charging IGST meant for exports by a merchant exporter against bond/LUT," said Ujwal Lahoti, chairman, the Cotton Textile Export Promotion Council (Texporicil).

"In the absence of such a provision, therefore, the manufacturer charges IGST on the goods supplied to the merchant exporter meant for exports under Bond/LUT. In the erstwhile central excise regime, there was a facility under which a merchant exporter who has executed a bond (B-1 bond) was provided with C T 1 certificates. Introduce similar facility at the earliest so that the merchant exporters exporting under bond / LUT can get IGST free goods from the manufacturers," Lahoti added. 

The GST Council in its meeting held on Saturday cut GST levy from 18 per cent to 5 per cent. Earlier, the GST for job works related to textile yarns, other than man-made fibres and textile fabrics, was fixed at 5 per cent, while for man-made fibres yarns and made ups/garments, the same tax levy stood at 18 per cent.

"The reduction in the GST rate for job work in the made ups and garment sectors will bring down the costs for the textiles sector across the value chain," said Lahoti.

The majority of the manufacturing activities in the textiles sector take place through job work and the reduction in the GST rate for job work has come as a huge relief for the sector.

The Foreign Trade Policy allows fulfilment of export obligations under various schemes through "third party exports". Such a provision of getting exports goods without payment of IGST from the textiles manufacturers will lead to ease of doing business and also a seamless flow of credits.

Meanwhile, Texprocil also urged the government to exempt the textile industry from furnishing bank guarantees while executing B-1 bond especially for those players who hold a membership with an export promotion council. Bank guarantee increases cost unnecessarily, said Lahoti.

Sanjay K Jain, vice-chairman of the Confederation of Indian Textiles Industry (CITI) said, "The job workers could not avail the input tax credit that had been increasing the cost of the products and affecting the export competitiveness and also the domestic consumers. Therefore, the domestic textiles industry needs a classification of all the textile job works under 5 per cent GST rate service list."