Textile industry urge GST on factory price not MRP of textiles

The Indian textile industry has recommended the government to levy goods and services tax (GST) on ex-factory price, which is always much lower than the maximum retail price (MRP) as it would leave some leg room for periodic discount offers. It has also warned the government that if the GST is levied on MRP then it would have multiple ill effects on the entire sector.

Considering expenses incurred on branding, transportation and a host of other aspects, it is important to have GST levy on ex-factory, which would be determined on the basis of actual manufacturing cost. The ex-factory price can easily be arrived at on the basis of the current system of Central
Sales Tax (CST) paid to the government, industry represented to the Finance minister Arun Jaitley.

The textile industry offers heavy discounts on MRP of branded garments not only in their factory outlets but also in organized retails to attract business. Especially in the lean season, even branded garments are available at affordable prices, which otherwise remain un-affordable for the average middle class.

Shanti L Shah, chairman and managing director of Hiralal Gulabchand Pvt Ltd, a city based garments manufacturer said that the MRP is just an indicative price, which cannot be determined for any tax collection. Levying GST on MRP of garments not only the frontline textile sector but also entire value chains of the textiles industry would be hit badly.

According to an industry veteran, MRP is deceptive and hence, cannot be seen as the final price of the product. If GST is implemented on MRP, it would sink the entire textile industry into deep water.

The textile industry has, in fact, has also urged the government to keep this employment intensive industry in the lowest slab of GST. Trade sources believe that 12.5 percent of GST would be a logical level without any ill-effect on the industry.

Speaking on the sidelines of the 62nd Garments Fair here on Wednesday, Dr Kavita Gupta, Textile Commissioner, said that the government has not taken any view on the demand of the industry. But, they are committed to support the textiles industry to the maximum possible extent. The industry, meanwhile, should start preparations for the GST.