Industry Hails GST Reduction On The Manmade Sector

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Industry Hails GST Reduction On The Manmade Sector

The domestic textile industry has welcomed the government’s recent decision to reduce the GST rate on manmade fibre yarn from 18 per cent to 12 per cent, stating that this would eliminate the aberration existing in the textile value chain and help strengthen it and make Indian textile industry globally more competitive.

“The announcement has sorted out a big issue of inverted duty for the MMF products as it was causing serious issue of escalation of the cost of synthetic products which was further leading to cheaper imports from the competing countries like China and Indonesia. As of now, there is no refund of ITC at fabric stage and under post-GST regime, with abolition of 12.5% countervailing duty and 4% special additional duty, the import has become much cheaper option than sourcing fabrics from the domestic market,” says Sanjay k Jain, chairman, Confederation of Indian Textile Industry (CITI).

As per Jain, the reduced GST rates would greatly benefit not only the spinning and power loom sector but would also support the initiative of Make In India and achieve the national objective of creating more employment opportunities. He also stated that this step of the government will also help the industry to cloth the poor masses of the nation at an affordable cost.

The CITI chief has also thanked the GST Council for giving relief for the blockage in credit of exporters that affects the cash liquidity of the exporters. He also hailed the announcement of processing the refund cheques for July exports by October 10, 2017 and August exports by 18th October and also the decision of creating an E-wallet from 1st April 2018. He stated that this would resolve the problem of working capital getting blocked and benefit the exporters. He added that the suspension of reverse charge mechanism till March 31, 2018 will benefit small businesses and substantially reduce compliance costs.

He also welcomed the announcement of easing the compliance burden on medium and small taxpayers and increasing the eligibility of Composition Scheme under GST from Rs 75 lakhs to Rs 1 Crore. Extending the tax exemption for 100% EoU units, Advance Licensing Scheme and EPCG Scheme and allowing the merchant exporters to purchase with 0.1% tax payment upto 31st March 2018 are a few more announcements that benefit the textile industry.

The industry has urged that the GST Council would soon consider refund of the accumulated input tax credit at fabric stage, especially the processed fabrics and also mandate the duty drawback committee to recommend appropriate duty drawback rates and RoSL rates to sustain the export performance. Jain also felt that the government should extend the transitional provision of giving the pre-GST duty drawback and RoSL rates for another six months or till the new calculated rates are announced.

Meanwhile, the textile industry has expressed its disappointed over RBI’s monetary policy that kept the policy rate unchanged given upside risks to inflation. Commenting on monetary policy announced recently Pankaj Patel, President, FICCI said, “FICCI is disappointed that the monetary policy committee has chosen to hold the repo rate and not reduce it. FICCI had sought a 100 bps reduction in interest rate.”

“In context of the current industrial situation, we felt that there was a need for a further cut in the repo rate. Growth conditions remain under strain which is reflected in the persistently weak investment activity and the first quarter GDP growth numbers. While RBI in the policy statement cites inflationary pressures to remain a concern, FICCI feels that there is need to give equal consideration to growth prospects,” adds Patel saying that at this juncture, the industry needs a feel-good factor in the economy that would motivate people to spend and buy more. Real interest rates remain unduly high and a cut in policy and lending rates would have helped propel demand for interest sensitive sectors.