PSF recycling units seek concessional rate under GST

The All India Recycled Fibre & Yarn Manufacturers Association, which represents 35 recycled polyester staple fibre (PSF) producers mostly small and medium-scale in the country, have sought concessional Goods and Services Tax (GST) to maintain the current excise duty cost advantage of recycled PSF compared with virgin PSF or a refund mechanism. GST Council is scheduled to discuss this at its meeting on June 3.

In the current tax regime, virgin PSF manufacturers are levied 12.5 percent excise duty, while recycled PSF attracts 2 percent concessional excise duty. As a result, spinners get the cost advantage of 10.5 percent if they opt to buy recycled PSF.

In such a scenario, the recylcing units will not be competitive and will become unviable. Hence, the Centre should look at concessional duty under GST for PET recycling units or have a system where the units can get a refund, the association said.

Because of the concessional rate of duty given by the Indian government to producers of recycled PSF, the industry has continued to grow. The association has requested the finance ministry to maintain the tax advantage for the recycled PSF industry in the GST regime, in order to continue their work of recycling PET bottles and thus helping protect the environment.

According to the association, if the existing differential is not maintained, operations of the whole PET recycling industry will become unviable. It is because PSF buyers would prefer to buy virgin PSF if the cost benefit is lost. This would also lead to closure of PET bottle recycling companies, leading to job losses in addition to increasing harm to the environment.

The PET bottle recycling value chain provides direct and indirect employment to around 500,000 people, which includes rag pickers, scrap dealers and employees working in the industry. The industry has grown in the last ten years and the current production of recycled PSF is around 660,000 metric tons per annum, turnover around Rs 5,000 crore.

The industry currently recycles around 700,000 metric tons of used PET bottles. “These PET bottle recyclers are directly helping the ‘Swach Bharat’ mission initiated by Prime minister Narendra Modi by recycling billions of PET bottles per year, which otherwise would have been strewn all around or ended up in landfills, posing grave risks to the environment, as it takes 500 years for a PET bottle to decompose, the association said.

Under the circumstances, they urge finance minister Arun Jaitley to consider their demand of continuing the tax cost advantage, when finalising GST rate on recycled PSF. They also seek intervention of textiles minster Smriti Irani to convince the finance ministry to accept their valid demands and thereby safeguard and promote the PET bottle recycling industry.

BP Sultania, president of the All India Recycled Fibre & Yarn Manufacturers Association said that first they were hit by the ban on import of PET bottle scrap, which led to a steep increase in prices of locally available PET bottle scrap and now if GST on recycled PSF is at parity with virgin PSF, this will make the survival of the PET bottle recycling industry very difficult.