Textile exporters welcome reasonable rates under GST

The Dollar Business Bureau

Textile industry welcomed the fixing of reasonable rates under the Goods and Services Tax (GST) regime on most of the items and also thanked the Finance Minister Arun Jaitley for quick conclusions on the subject. 

Commenting on the GST rates, A Shaktivel, Regional Chairman, Federation of Indian Exporters' Organisation (FIEO)’s Southern Region, said that the lower rates under GST across the products that have high potential of exports will go a long way in encouraging ‘Make in India’.

The pharmaceuticals, leather and footwear, food products and textiles received a good deal in new tax regimes, he said in a statement. 

On textile sector, Shaktivel said that the decision of lower tax rates under GST for natural fibre, fabrics, made-ups and apparels will enable enhanced value addition, employment generation and increased exports and also propel local production across all the sectors. 

“The simplified procedure of job works by allowing movement of goods by Challan only will go a long way in developing supporting eco system much needed for garment industry's competitiveness,” he added.

India’s textile industry is estimated at $120 billion today and can reach $230 billion by 2020, if additional focus was provided, so that the exports of raw materials such as yarn and fibre can be substituted with other value added items. 

Raja M Shanugham, President, Tirupur Exporters' Association (TEA) also welcomed the government’s move for considering the demands and fixing the GST rate of 5% for garments such as fabrics, cotton and cotton yarn. 

“This would help the predominantly cotton based textile industry to grow and also increase exports, he said in a statement. 

However, Shanugham expressed dissatisfaction on fixing the 18% rate for fabrics and synthetic fibre and stated that the garments units might find it difficult to offset Input Tax Credit.  

The exporters had also shown concerns regarding the fixing of service tax of 18% for job working units where over 80% of garment exporting units in the Tirupur region are conducting their job work activities, he said.

He also sought exemption of the job working units for payment of Service Tax. 

In its meeting last week, the GST Council has fixed a 5% rate on fabric, cotton fibre and yarn. However, a rate of 18% will be levied on man-made or synthetic fibre yarn. All apparels would attract 12% GST, while apparels below worth Rs.1,000 are kept in 5% bracket. Jute and silk have been put under the “nil” category under the new tax regime.