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Industry expects uniform 5% GST rates on textile items
May '17
The textile industry has been urging the Central government to decide a uniform Goods and Services Tax (GST) rate of 5 per cent for items across the textile value chain. The Council is expected to reach a consensus regarding the tax structure during the two-day meeting chaired by Union finance minister Arun Jaitley, which is currently underway in Srinagar.

The industry associations have also called on the government to cover all segments under the new tax structure in order to discourage tax evasion.

Over 20 textile associations led by the Southern India Mills' Association (SIMA) had recently issued a joint memorandum to the Union textiles minister Smriti Irani. They said that the entire cotton textile value chain is currently enjoying the zero per cent Central Excise benefit under optional Cenvat from 2004. Under this scenario, a uniform levy of 5 per cent GST on all textiles and clothing products would ensure smooth migration of entire textile value chain from the present tax structure to GST tax structure with full compliance, creating win-win strategy for all the stakeholders and would bring substantial revenue to the exchequer when compared to the existing revenue.

Talking about his expectations from GST, Sriramulu Balakrishnan, MD, KG Denim told Fibre2Fashion, "At present, fabrics do not attract excise duty or sales tax (in most states in India). Post-GST, the textiles industry expects that it should be nil rate of tax or be minimum. Representations have been made to the ministry of textiles by TEXPROCIL. Branded apparel is subject to both excise duty and sales tax. Any GST on fabrics and yarn can be utilised by brands and retailers as credit for their operations."

Vikram Mahaldar, VP & global sales head of OCM Pvt Ltd believes that after the GST is imposed, mills and buyers will have to pay extra money for fabrics made from natural fibre, as they are exempt from any taxes in most part of the country. This may lead to short term decline in demand till channel stocks last, and until customers accept the change.

"However, segments like synthetic fabrics, the price increase can be offset, to an extent, with lower cost of inputs, which are taxed," Mahaldar told F2F.

As for the e-commerce sector, it is likely to bring in greater convenience as GST promises standardisation for online marketplaces. "The 'one tax, one market' concept on which GST is based is expected to be a big welcome step and promising standardisation for online marketplaces to make e-commerce convenient. I believe once GST comes into full effect, e-commerce sector would be structured well and the way forward will be easier," said Jimmy Kaul, MD and co-founder of Shopotox. (KD)

Fibre2Fashion News Desk – India

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