GST council likely to lower tax rate on garment job works to 5pc

The GST Council headed by Finance Minister Arun Jaitley and comprising of representatives of all the 29 states, this week is likely to consider lowering of tax rates for job works for making garments to 5 percent from 18 percent and will be also considering removing anomaly in taxation in cases where the intermediate goods are taxed at the highest bracket than the tax on final output, the source said.

It will be the first full fledged meeting of the GST Council, chaired by Jaitley and comprising state counterparts, after the roll out of the new indirect tax reform on July 1.

Apart from reviewing the roll out of the Goods and Services Tax (GST) regime, the 19th meeting of the Council on August 5 may take a look at streamlining the anomalies raised by the industry over the past one month, said sources.

Currently, services by way of job works in relation to textile yarns (other than man-made fibre/filament) and textile fabrics attract 5 percent GST. Other job works in relation to garments attract an 18 percent levy.

As per the rates decided by the Council, in the textiles category, silk and jute fibre have been exempted, while cotton and natural fibre and all kinds of yarns will be levied a 5 percent GST. Man-made fibre and yarn will, however, attracted 18 percent tax rate.

All categories of fabric attract a 5 percent rate. Man- made apparel up to Rs 1,000 will attract a 5 percent tax and those costing above Rs 1,000, will attract 12 percent.

Sources said that the Council may look at streamlining it and being all job works, including for making garments from fabric, under the 5 percent slab. This would help the textile sector as the final product was taxed between 5-12 percent.