The Council slashed the tax rate on textile job work from the earlier decided 18 per cent to 5 per cent in its 16th meeting held on June 11 after the textile industry appealed for the reduction. The industry had urged to slash the rates as over 80 per cent of the manufacturing activities in the textile value chain are carried out on a job work basis by the MSME due to the decentralised nature of the segments of textile industry.
M Senthilkumar, chairman, SIMA said that garmenting and made ups predominantly work on a hub and spoke model and creates 70 to 150 jobs per crore of Investment especially for the rural women and people below the poverty line. He has mentioned that the term fabrics would apply only up to the stage of finished fabric cutting and thereafter they would be termed as garment or made-ups or any other sewn products and therefore, suitable amendment/inclusion is required to avoid any ambiguity at a later stage.
SIMA chief has also reiterated that the industry demand of reducing the GST rate on manmade fibre, filaments and spun yarn from 18 per cent to 12 per cent as the fabric attracts only 5 per cent GST, may be considered. He has added that such an exorbitant rate would increase the clothing cost of the poor man’s fabrics by 5 to 6 per cent and would seriously affect the major textile clusters such as Surat, Bhiwandi, Panipet, etc., making several lakhs of people jobless. He has pointed out that the Indian textile industry could achieve the potential and envisaged growth rate only when the raw materials, especially synthetic fibres, are made available at an internationally competitive rate.
Meanwhile, Senthilkumar has welcomed the decision of GST Council and thanked the finance minister and the textile minister for favourably considering the appeal made by the association and reducing the service tax on textile job work to 5 per cent. He said that under current tax structure, textile job works are exempted from service tax as such activities are manufacturing processing and not servicing in nature. He added that 5 per cent service tax with full input tax credit would enable the various textile manufacturing segments including reeling, sizing, powerloom, handloom, knitting, yarn dyeing, fabric bleaching, mercerising, dyeing, printing and finishing segments to set off their input credits and pay very minimal GST on services. (KD)
Fibre2Fashion News Desk – India
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