Managing director TT LTD., Sanjay K Jain has thanked finance minister Arun Jaitley and Textile minister Smriti Irani for keeping the cotton value chain and garments (<1000) under 5 per cent GST slab which will ensure that there is no inflation for the common man due to the proposed tax. Describing the GST as a very balanced one, Jain, who is also chairman of NITRA, said the new tax rate would benefit the industry in terms of lower logistic costs, low lead times, make pan India selling easier by removal of Forms needed, reduce administrative hassles by creating a single tax window, reduce costs by allowing taxes in all expenses to be adjusted etc.
However Jain, also vice president – FOHMA and WBHA said there are few oversights and anomalies which we hope will get corrected in due course.
- A textile is a very fragmented and unorganized industry. Mostly manufacturers just do a single process and hence a lot of job working is involved. Pre GST it was recognized as a manufacturing activity and exempted from service tax. However such exemption is missing in the current GST exemptions for services. This means it would have a 18 per cent GST rate which would make the job work segments and their principals uncompetitive against large composite mills who will not have this impact due to in-house production. We are hopeful that this shall get suitably modified in the next GST Council meeting.
- Synthetic chain is impacted due to the inverse rate structure – fibre and yarn enjoy 18 per cent GST while fabric & garments have 5 per cent. This problem is further accentuated due to disallowance of refund of excess GST on input.
- This GST structure will lead to more cotton consumption, due to duty variance of 13 per cent. We have requested to reconsider and reduce synthetic yarn duty to 12 per cent to make it more equitable or at least allow refund of excess credit if any.
- Another indirect fall out from GST, is the big threat of imports of fabric and garments from China, Bangladesh and Sri Lanka. Earlier imports had a 12.5 per cent CVD which wasn’t adjustable. Now they would attract 5 per cent GST which is adjustable against subsequent sales. Hence post GST the industry will be relatively disadvantaged by 12.5 per cent vis a vis its peers abroad. This could create a very big issue as 12.5 per cent in textiles is more than the net profit of most manufacturers. We shall need to approach the commerce and textile ministry to work out some solution to save the industry from this impending avalanche by increasing import customs duty on textile products, Jain said.
“We hope the above anomalies are corrected soon, so that our Industry can focus on accelerated growth” Jain former president, NITMA added.
– Apparel and Textile News, Apparel Talk, Indian Apparel
