CITI appeals for lowering MMF & yarn GST rates to 12%

J Thulasidharan, chairman, CITI has requested to address the issue of 18 per cent GST slab on MMF and synthetic yarn on urgent basis as this would affect the MMF textile segment prospects in the country in a big way. He explained that this will come as big blow to small fabric manufacturers in powerloom, knit and processing segments and prevent seamless flow of input tax credit and allow breakage of value chain.

The chairman explained that MMF and synthetic textile manufacturers will not only lose profit but also gradually start losing grounds against competitors like China, Bangladesh, Vietnam and Cambodia who enjoy fiscal and non-fiscal advantage in their countries compared to India. He said, "Around 166 countries have GST in place with lower slab compared to what India has announced." 

Powerloom accounts for more than 86 per cent of the total man-made fabric production in India while rest comes from other segments like handloom, hosiery and mills. If rates, are not reduced then there will be flooding of the fabrics from China which would wipe out powerlooms and other SME fabric manufacturers from business. Powerlooms employ around 65 lakh workers in 5.5 lakh units spread across the country.

CITI also highlighted that SMEs and those who do not have composite mills are going to suffer from excessive competition and high cost. These players have majority share in fabric production of the country. Therefore, he requested that government must ensure lowest rates on raw materials essentially for man-made sector to hold the investment in the industry and to encourage production.

Currently SMEs' margins are very thin and industry keeps only 2 to 5 per cent of the turnover in a year, therefore extra burden in the form of extra taxes would add to the woes of the industry. "High rates on MMF and synthetic yarns would inevitably affect the actions and incentives of the SMEs of the textile to remain in the business," said Thulasidharan.

CITI has also requested that the highly labour oriented garment and made up segments should also be considered under the 5 per cent GST slab of service tax as the job work related these segments still come under 18 per cent service tax slab.

Chairman CITI has urged the government and GST council to accommodate industry’s demand of 12 per cent GST rate on MMF and synthetic yarn or refund of duty under inverted duty incidence at fabric stage as prescribed in the GST Act in the upcoming GST council meeting on June 30, 2017 as this would facilitate the industry’s growth.

At the same time, the association has welcomed the GST council’s announcement on increasing the turnover limit for Composition Levy for CGST and SGST to special category states also. This will give further boost to the investment in the textile sector in these special category states. (KD)

Fibre2Fashion News Desk – India