Topic

How far will the latest announcement of the GST Council help India's textile and apparel industry?

The decision to reduce GST on MMF yarn to 12% is transformational.
The 22nd meeting of the GST Council has decided to reduce GST rate on man-made fibre (MMF) yarn to 12 per cent from the earlier 18 per cent, and other measures. Fibre2Fashion presents views of some of the textile and apparel organisations.

 

The changes which have been announced by GST Council will give a great relief to the apparel industry for the immediate term, as the sector has been facing severe liquidity crunch after the introduction of GST. The AEPC would like to thank the various government departments which have been working closely with all the stakeholders for considering the plea of its members and reducing the rate of various man-made raw material items. However, since the duty structure remains inverted with fabric at 5 per cent GST, we are hopeful that the embedded taxes arising out of this inverted structure will be refunded to exporters through appropriate mechanisms.

The reduced rate of GST would greatly benefit the spinning and powerloom sector, improve global competitiveness and cloth the poor masses of the nation at an affordable cost. The announcement of dates for processing the refund cheques for July and August exports and also the decision for refunding a notional amount for the remaining months and later adjust the amount in the e-wallet April 1, 2018, would resolve the problem of working capital blockage and benefit the exporters. The suspension of reverse charge mechanism till March 31, 2018 will benefit small businesses and substantially reduce compliance costs. The announcement of easing the compliance burden of medium and small taxpayers and increasing the eligibility of composition scheme from Rs 75 lakhs to Rs 1 crore, extending the tax exemption for 100% EOU units, Advance Licensing Scheme and EPCG Scheme and also for the merchant exporters with 0.1% tax payment upto March 31, 2018 are few more announcements that benefit the textile industry.

By announcing reduction of GST rates for MMF yarns and its products from 18 per cent to 12 per cent, the GST Council has met a long pending demand of the textile industry. It will help strengthen the entire textile value chain and make Indian textile industry globally more competitive. The announcement has sorted out a big issue of inverted duty for the MMF products as it was causing serious issue of escalation of the cost of synthetic products which was further leading to cheaper imports from the competing countries like China and Indonesia. As of now, there is no refund of ITC at fabric stage and under post-GST regime, with abolition of 12.5 per cent Countervailing Duty and 4 per cent Special Additional duty, the import has become much cheaper option than sourcing fabrics from the domestic market.

I hope that the GST Council would soon consider refund of the accumulated Input Tax Credit (ITC) at fabric stage especially the processed fabrics and also mandate the duty drawback committee to recommend appropriate duty drawback rates and RoSL rates to sustain the export performance.

We are happy that the government has provided far reaching relief to the exporting community. The government ensured that refunds for GST amounts filed during the months of July/August will be made available by October 10th and 18th respectively. The government has tried to resolve the liquidity issues faced by the exporters.

Reducing the GST on MMF yarn from 18 per cent to 12 per cent and duty credit scrips from 5 per cent to 'zero' would also give a boost to exports. Other measures like exempting export promotion schemes like advance authorisation scheme; EPCG from the payment of GST up to March 31, 2018 should lead to a spurt in investments.

The decision is transformational. It shows the government’s and GST Council’s readiness to listen and accept the genuine concerns of the manufacturing sector by bringing the changes based on the ground reality. By this change, credit blockage will be very minimal to weaving sector, and cost difference will be absorbed throughout the value chain in a uniform manner without impacting the financials of any sector.

Now with better GST rates for both cotton and MMF and blended sector, industry can expect a boost in volumes and with growing domestic demand, Indian textile industry can expect improvement in utilisation levels in the short term and also more investments in weaving and processing sectors in the medium term.

 

Published on: 09/10/2017

DISCLAIMER: All views and opinions expressed in this column are solely of the interviewee, and they do not reflect in any way the opinion of Fibre2Fashion.com.

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