Apparel makers urge govt to fix 5% GST on all garments, end duty issues

The apparel industry has sought a flat 5% GST across all garments to prevent under-invoicing, grey market activity, and inverted duty structure under the proposed GST reforms

The apparel industry on Tuesday appealed to the Centre to bring all garments across all price points under the 5 per cent goods and services tax (GST) slab. Currently, garments priced below ₹1,000 fall under the 5 per cent slab and those valued above ₹1,000 are taxed at 12 per cent GST rate.

 

The Clothing Manufacturers Association of India (CMAI) said that if certain portions fall under the 18 per cent GST slab then it would be “disastrous for the industry”.

 

The note also said that if the GST slabs are higher for the apparel industry, it would nudge manufacturers to compromise on the quality of their products and reduce prices just to fall under the lower tax slab.

 

The difference between the two slabs, which at the moment is 5 per cent and 12 per cent, would become 5 per cent and 18 per cent. This would encourage under-invoicing, unhealthy practices, and the grey market, as manufacturers might prefer to shift there rather than pay such a high rate of GST.

 

“The only way the proposed GST reforms will be beneficial for the apparel industry is if the entire textile value chain is shifted under the 5 per cent slab, which the apparel industry has been asking for since the day GST was introduced. This will make clothes cheaper and also eliminate the problem of the inverted duty structure. Therefore, I strongly recommend and urge the government to shift the entire textile value chain under the 5 per cent slab,” Rahul Mehta, chief mentor of CMAI said on the proposed GST reforms. 

 

Mehta also said that the difference in the tax slabs could cause under invoicing, unhealthy practices, and the grey market, as manufacturers might prefer to shift there rather than pay such a high rate of GST.

 

Prime Minister Narendra Modi announced GST reforms as a Diwali gift to lower the tax burden on the common man in his Independence Day speech.

 

According to news reports, the 12 per cent GST rate is expected to go and the items are expected to fall under the 5 per cent slab.

 

The Retailers Association of India also said in its note that it has asked the government to ensure that the new structure does not lead to inverted duty structures in certain product categories.

 

“A balanced and rational GST framework will help avoid supply chain inefficiencies and working capital blockages for businesses,” Kumar Rajagopalan, chief executive officer, Retailers Association of India said.