Demand for reduction of GST rate on MMF and yarn

Textile mills demand reduction of GST rate on manmade fiber (MMF) and yarn to 12 percent from 18 percent and refund should be permitted for fabric manuafacturers.

According to Prabhu Dhamodharan, secretary of Indian Texpreneurs Federation, about 430 mills have recently sent their appeal to the Prime Minister’s Office in this regard.

While the rate for fabric is 5 percent that for yarn and fibre is 18 percent. Fabric manufacturers do not have the provision of refund and hence, this would become a “blocked credit”.

According to M. Senthil Kumar, chairman of Southern India Mills’ Association, the textile industry was hopeful that the GST council would consider the demand of the industry at its meeting on Sunday on reduction of duty for manmade fibre and yarn.

There would be an accumulation of excess credit at 18 percent rate on yarn. This would increase the fabric cost and affect the independent weaving and spinning units.

For instance, an independent weaving unit having about 50 looms and producing 100 % viscose fabric would incur an additional cost of over Rs. 2 lakh a year with 18 % rate compared to Rs. 1.3 lakh at 12 % rate.

The Government should allow refund of accumulated input tax credit at fabric stage and should include job work for garments, made ups, and other textile products at 5 % rate, he said.

Mr. Senthil Kumar said that differential rates and non-refund of accumulated input tax credit would not only affect the industry, lead to wrong declarations and corruption but it also would create an unhealthy competition with composite units.