Amid protests staged by textile traders in various pockets of the country over the new Goods and Services Tax (GST), Finance Minister Arun Jaitley clarified that the demand of the textile traders to not levy any tax on fabrics cannot be accepted.
While protesters have highlighted that the new tax regime is complicated and lacks clarity, Jaitley stressed that necessary steps have already been taken to facilitate taxpayers to take GST registration.
"GST Sewa Kendras have been set-up in various centres to handhold the taxpayers and to provide all necessary guidance regarding GST compliance. The GST rate structure for the textiles sector enables ease of classification and determination of rate," Jaitley argued.
Addressing a question posed during the Rajya Sabha session here on Tuesday, Jaitley pointed out that nil GST on fabrics will break the input tax credit chain and then the garment manufacturers will not be able to get the credit of tax on previous stages.
Additionally, on the import front, he said that there will be zero rating of imported fabrics, while domestic fabrics will continue to bear the brunt of input taxes.
Since the GST rates are equal to or lower than the pre-GST tax incidence, Jaitley clarified that the price of fabrics is not likely to go up.
He also pointed out that the organised traders and unorganised sellers in the textile sector have not been affected by the GST.
Textile traders from Surat, Ahmadabad and other states are staging a fortnight-long protest over the implementation of the new tax regime.
The protestors, who lashed out against the Centre over the lack of clarity in the GST, claimed their strike has already caused a loss of Rs 6,000 crore to the government.
In Surat and Ahmadabad, markets remained closed with traders blocking traffic in certain areas, as they feel that the tax is too complicated for their understanding.
Under the new taxation system that was rolled out on July 1, it was decided that garments under Rs 1,000 would attract a five percent charge, while those above Rs 1,000 would attract a tax rate of 12 percent. Also, a five percent tax would be levied on fabrics with no refund of unutilized input tax credit.