Move to defer GST rate revision talks by 3 months to hit 80% garment units

Most such units are jobwork-oriented, can't take 18% tax rate; several workers stand to lose jobs

The GST Council's decision to consider a rate revision only after three months is likely to deliver a severe blow to the country's garment industry, say mill owners. The man-made fibre yarn spinning sector, which was expecting a reduction in rate from 18 per cent to 12 per cent, is likely to take a huge hit.

M Senthilkumar, Chairman, The Southern India Mills’ Association (SIMA) has stated that the entire cotton textile industry is thankful to the Government for bringing cotton textiles and all jobwork relating to textile yarns (other than MMF and filaments) and fabrics under the five per cent GST rate. 

More than 80 per cent of the garment/made-ups manufacturing units are in the decentralised sector and undertake jobwork. "These units are likely to become unviable with 18 per cent service tax on jobwork, forcing them to closed down and render hundreds of thousands of people jobless," Senthilkumar said.

"The GST Council decision to consider any rate revision only after three months has come as a severe blow for the garmenting, made-ups and synthetic spinning sectors," SIMA said in a statement.

The garment/made-up sector, the largest employment provider in the entire textile value chain, creates 100-150 jobs for every crore of rupees invested, Senthilkumar claimed. The industry was hoping the GST Council would include jobwork on garmenting/made–ups under five per cent GST rate.  

Senthilkumar opined that the industry could have benefited if these demands were implemented and that such a move would have also created a level-playing field in a highly competitive market scenario. He requested the Central Government to consider including the jobwork done in the garment and made-up segments under the five per cent rate. These units are currently exempt from service tax. 

SIMA also wants the government to reduce the GST rate on man-made fibre and its blended yarn from 18 per cent to 12 per cent at the next GST Council meeting scheduled on June 30, 2017.