Textile sector seeks rationalization of GST to realize budgetary benefits

Trade & Policy

Textile sector seeks rationalization of GST to realize budgetary benefits

While the government has increased the outlay for the textile sector in the recent Budget to Rs 7,148 crore from Rs 6,222 crore as also proposed a higher allocation of Rs 2,300 crore (as against 1,956 crore) for ATUFS , the textile industry remains concerned about the overall outcome in the wake of anomalies existing post GST. In the recent past, the industry is faced with one of the biggest challenges in terms of growing imports of textiles as also slowdown in exports.

“Quite a few measures have been announced in the Budget. However, steps need to be taken to correct the imbalance caused by the GST. The whole industry is being hit by the imports post GST. The industry has been asking the government for increase in import duty across the value chain (yarn and fabric) and it is a big disappointment for the industry that industry’s recommendations have not been addressed,” says Sanjay Jain, Chairman, CITI.

The latest data released by the Ministry of Commerce & Industry for the month December 2017, shows that the textiles and apparel exports from the country have in fact declined by 3 per cent to $2996 million as against $ 3075 million in December 2016. The cumulative exports have only marginally improved by 2 per cent as the exports stood at $26,136 million in April-December 2017 as against $25,721 million in April-December 2016.

Moreover, the imports of textiles yarn, fabric and made-ups article has increased to US$ 1,388 million in April to December 2017, indicating a drastic rise of 19.65 per cent. As per the latest statistics released by the Export Promotion Bureau of Bangladesh, India’s imports of garments from Bangladesh has reached $111.3 million during July to December 2017, indicating a sharp rise of 66 per cent from $66.9 million during the same period last year.

As per Jain the ongoing scenario is negatively affecting the domestic yarn, fabric and garment manufacturers. He further stated that there is a greater need to impose safeguard measures such as Rules of Origin, Yarn Forward and Fabric Forward Rules on the countries like Bangladesh and Sri Lanka that have FTAs with India in order to prevent cheaper fabrics produced from countries like China routed through these countries. Garment manufacturers in India have to pay duty on imported fabrics, while Bangladesh can import fabric from China duty free and convert them into garments and sell to India duty free. This is putting Indian garment industry at a major disadvantage and this figure is expected to go up in coming months.

He says: “We are grateful to the government for listening to the request of the textile industry and increasing the Basic Customs Duty (BCD) for manmade fibre- based fabric products from 10 per cent to 20 per cent, thus, protecting the interests of the domestic players. We are also thankful to the government for reducing the GST rates for manmade fibre Yarns and its products from 18 per cent to 12 per cent and bringing all the textile job works under the service list of 5 per cent GST.”

However, the CITI chief is of the view that the textile manufacturing and trade of the country is still under stress owing to the ongoing transition. In order to overcome the challenges faced by the industry, CITI has been strongly representing the case of cotton yarn and fabrics with every government department, including Prime Minister's Office to enhance the competitiveness of the cotton yarn and fabric sector. CITI recently gave representations to the concerned ministries and Chief Economic Advisor to extend MEIS and IES benefits to cotton yarn and allow ROSL in fabric and yarn at par with garments and made-ups.

In fact, CITI in its budget proposals to the ministry of finance had earlier highlighted various GST related issues faced by the industry. These include reduction of GST on manmade fibre from 18 per cent to 12 per cent, recycled PSF from 18 per cent to 5 per cent, exemption of raw cotton from 5 per cent GST, refund of accumulated ITC at fabric stage and with job workers, etc.