Indian man-made fabric (MMF) manufactured in Surat, it is estimated that around 40 percent of the production of saris and dress material is done targeting mainly the poor and lower middle class consumers and major part of the production of saris and dress material is supplied throughout the country.
If the central government implements 12 percent GST on fabrics made of MMF and 18 percent on branded textiles, the cheapest sari sold at Rs 200 will become costlier by Rs 95 for the end consumers.
At present, the MMF centre in the city manufactures around four crore metres of fabric per day on more than 6.5 lakh powerlooms. There are around 165 textile markets housing over 65,000 wholesale textile shops, having daily turnover exceeding Rs 120 crore.
According to Industry experts, an average of one kilogram of yarn can manufacture three saris of 5.50 metres each, which are sold not less than 200 per sari. The higher range of saris cost more than Rs 1,000 and beyond, which generally has value addition in the form of embroidery, etc.
At present, the cenvat, excise duty at 12.50 percent and 5 percent and VAT put together on one kilogram of yarn comes to around Rs 16.31 and tax forgone on dyes and chemicals comes to around Rs 7.42. However, the total tax on fabric and yarn comes at Rs 23.73 per kg.
As per the industry calculation, if the government fixes uniform GST of 5 percent on the entire textile value chain then the GST revenue on one kilogram of fabric and saris would be Rs 30. Thus, the government is getting more revenue in the new GST regime than the present level of revenue.
However, if the GST slab of 12 percent on fabrics and 18 percent on branded textile is fixed then the wholesale sari valued at Rs 200 will attract GST of Rs 95 and it will be passed to the end consumer, making the cheapest sari costlier.
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