Textile Industry Welcomes 5% GST On Cotton Textiles

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Textile Industry Welcomes 5% GST On Cotton Textiles

India’s textile industry has welcomed the 5% Goods & Services Tax (GST) rate on cotton textiles as a progressive decision which will give an impetus for growth and development of the entire textile value chain.

Texprocil Chairman Ujwal Lahoti hailed the decision and thanked the GST Council for accepting the industry suggestion to keep GST rates low. He said that the low rate will not only ensure compliance but also encourage farmers to grow more cotton, as well as not cast any additional burden on the sector. It would also ensure that India regains its competitiveness in the world market, he said.

He backed the GST Council's demand for speedy refund of input tax credits on exports so that exporters' funds did not get blocked. Southern India Mills' Association (SIMA) Chairman M Senthilkumar said that the 5% GST rate on cotton fibre would benefit 20 million cotton farmers, while the same rate on readymade garments below Rs 1,000 would benefit the common man.

He expressed hope that textile job works would be exempted from service tax considering the fact that units which operate in the powerloom, knitting, processing and garmenting space are predominantly decentralised micro and small enterprises. However, he stated that the 18% GST on man-made fibres and synthetic yarn would have an inverted duty structure problem as the fabric would attract only 5% GST.

Reacting to the development, Federation of Indian Exporters' Organisation (FIEO) Southern Regional Chairman A Shaktivel stated that lower GST rates across products would go a long way in promoting 'Make in India'. He stated that the simplified procedure for job works by allowing movement of goods by challan would help develop the supporting ecosystem, which is much needed for the garment industry’s competitiveness.

He opined that the focus given to the domestic textile industry would give a push to exports. India will be able to achieve US $230 billion by 2020 by exporting more value-added products, he stated. The announcement of lower rates of GST for fabrics, natural fibres, apparel and made-ups will enable increased value addition, employment and exports and propel domestic production across the sectors, he stated.

In a related development, the Tirupur Exporters' Association (TEA) President Raja M Shanmugham thanked the GST Council for fixing GST rate at 5% for garments including cotton, cotton yarn and fabrics, which it stated would help the predominantly cotton-based textile industry to grow as well as increase exports.

He also expressed his disappointment for fixing the GST rate at 18% for synthetic fibre and fabrics, noting that garments units may find it difficult in offsetting input tax credit. Apparel exporters were also concerned about the service tax fixed for job working units at 18% where more than 80% of garment exporting units in the Tirupur cluster carry out job working activities, he said, seeking to exempt job working units from service tax.

In a statement, Indian Texpreneurs Federation Secretary, Prabhu Dhamodharan said that the uniform and lowest slab GST in cotton segment up to fabric stage will make the textile manufacturing sector efficient as well as trigger growth across the country.