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GST impasse – Domestic textile trade falters
Mar '11
Producers-cum-exporters from the five sectors which previously were under the zero-tax regime have halted their domestic as well as international trade as they are looking forward to the government to clear the uncertainties in the ordinance issued on March 15.

Through the ordinance, the government ended the 17 percent general sales tax (GST) exemption, that these sectors enjoyed on their domestic sales and also obliges traders to trade with only registered taxpayers, failing which, they would be subjected to the levy of 17 percent GST.

The collective exports of the five zero-rated sectors, namely leather, textiles, carpets, sports goods and surgical goods, for financial year 2009-10 remained above $13 billion.

None of the ginners, cotton cultivators or weavers are registered taxpayers or exporters, and hence if an exporter purchases products from them with an intention to export the same after value addition, he would be subjected to 17 percent GST.

Also it is apprehended that, such halting of trade would result in delay in exports, and would cause irreversible damage to the country's economy and may even lead these industries to lose their hard-earned markets to other competing countries in the region.

Meanwhile, as the cotton yarn producers are not being able to gain clarity regarding the law, they have blocked supplies to the fabric producers.

Fibre2fashion News Desk - India

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