The textile industry has said it is worried over government's decision to impose 18 per cent GST on manmade fibre as the levy will dent the margins of firms manufacturing synthetic yarn and could lead to job losses.
The industry is also uneasy about the effect on jobs like weaving, knitting, cutting and packaging, which it fears could hurt the small units badly.
Manmade fibre fabric and yarn, along with dying and printing units and embroidery items will attract 18 per cent levy under the Goods and Services Tax (GST) regime slated for a rollout from July 1, leading to an increase in input costs.
"The 18 per cent service tax will impact a lot. This is a big worry as presently there is no tax on job work. It will mainly affect the small and medium scale exporters engaged in job work activities," Cotton Textiles Export Promotion Council Chairman Ujwal Lahoti told PTI.
He said there is also a possibility of job losses in the industries manufacturing synthetic fibres.
Confederation of Indian Textiles Industry Chairman J Thulasidharan observed that the 18 per cent GST rate on manmade fibre and synthetic yarn would have inverted duty structure problem as the fabric would attract only 5 per cent GST rate.
He also pointed out that the high GST rate can also lead to an increase in input costs and adversely affect the entire textile value chain.
Echoing similar views, Southern India Mills Association Chairman M Senthilkumar said the GST rate would have inverted duty structure problem.
The industry fears that high tax rates will intensify the tough competition it faces from countries like Bangladesh, Vietnam and China by leading to cheaper imports, increase the prices of textiles products and hit the business of domestic manufacturers.