Latest revision of GST rates welcomed by textile industry

The Country’s finance minister Arun Jaitley on Friday announced latest revision in the goods and services tax (GST) rates. Tax rates on man-made yarn is reduced from 18 percent to 12 percent, while slashing GST levy on job work of zari (embroidery) to 5 percent, from the previously agreed upon rate of 12 percent.

Further, small and medium enterprises (SMEs) with an annual turnover of up to Rs 1.5 crore have been allowed to file quarterly income returns and pay tax, instead of the current provision of monthly filings. The GST Council also announced a slew of other measures related to the new tax regime that has completed two months now.

Ujwal R. Lahoti, chairman of Cotton Textiles Export Promotion Council said that the exempting export promotion schemes such as Advance Authorisation Scheme and EPCG from payment of GST till March 31 next year will lead to spurt in investments in the textile sector. As 40 % of India’s textile exports of around 40 percent are done by merchant exporters. By providing the facility that they need to pay a nominal amount of 0.1 % as GST while claiming goods from manufacturers for exports will ensure that there is no cash flow problem.

According to Sanjay K. Jain, chairman of the Confederation of Indian Textile Industry, processing of refund claims for July exports by October 10 and for August exports by October 18 and decision to create e-wallet from next April will improve the cash flow for exporters. This will resolve the problem of blocking of working capital for exporters.

He was hopeful that the GST council will soon consider refund of the accumulated input tax credit at fabric stage, especially for processed fabric.
Chairman of Southern India Mills’ Association P. Nataraj has said in a press release that the industry had been appealing to the GST council to reduce GST rate on man-made yarn to 12 % from 18 %. This has been addressed by the council by reducing the rate to 12 % for MMF filament yarn, MMF spun yarn and filament sewing thread. The GST council should mandate the duty drawback committee to recommend appropriate duty drawback rates and Rebate of State Levies rates to sustain exports, he said.

Meanwhile, the industry is still seeking refunds for the accumulated input tax credit at the fabric stage, especially for processed fabrics, besides mandating the duty drawback committee to recommend appropriate duty drawback rates and RoSL rates to sustain export performance. They hope the government would extend the transitional provision of giving the pre-GST duty drawback and RoSL rates for another three months or till the new rates are announced.

Prabhu Dhamodharan, convenor of Indian Texpreneurs’ Federation, said that by reducing the GST rate for MMF and blended yarn to 12 %, the credit blockage for weaving sector will be minimal. Export of garments made of manmade fibre and blends is growing rapidly. With this favourable duty structure, more players will be motivated to enter it and cost competitiveness of Indian products will improve.

According to the president of the Indian Chamber of Commerce and Industry, Coimbatore, Vanitha Mohan, the option of quarterly filing of returns and payment of taxes by small businesses, rate cut on 27 items, and rationalisation of job work rates will bring to small businesses. However, the Government should announce more concessions for specific sectors in the MSME area.

According to Tarachand Kasat of Surat based GST Sangharsh Samiti, this is sheer lollipop for traders. They had made 14 specific demands, of which their primary plea was to keep the trading community out of the tax net until a turnover of Rs 2 crore was realised. These have not been met. If their demands are not met, they will have to go on a strike again. There are roughly around 65,000-75,000 traders in the Rs 50,000-crore synthetic textile industry in Surat.

On the other hand, the weaving community has welcomed the tax rate revision, along with the extension of the reverse charge mechanism (RCM) till March 2018 while, textile mills stated that the reduced rate of GST would benefit the spinning and power loom sector further.