18% GST ON MMF AND YARN WILL DENT FABRIC MANUFACTURING
New Delhi, Monday, June 19, 2017: Chairman CITI has welcomed Union Finance Minister and GST council’s announcement on increasing the turnover limit for Composition Levy for CGST and SGST to special category states also. According to him this will give further boost to the investment in the textile sector in these special category states. Moreover, he also thanked Government for keeping 5 per cent GST rate on transportation with ITC in respect of input services and GST paid on ships, vessels including bulk carriers and tankers.
Shri J. Thulasidharan Chairman, CITI has urged Union Finance Minister Shri Arun Jaitely and Shri HasmukhAdhia, Secretary, Department of Revenue, MOF for reducing GST rates on man-made fibres and yarns from 18 to 12 per cent. He 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.
Chairman explained that MMF and Synthetic textile manufacturers will not only loose profit but also will gradually start losing grounds against the competitor’s 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”.
Power loom accounts more than 86 per cent of the total man-made fabric production in India while rest comes from other segments like handloom, hosiery & 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. Power looms alone employs around 65 lakh workers in 5.5 lakh units spread across the country.
CITI Chairman highlighted that it is the SME 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 the raw materials essentially for man-made sector to hold the investment in the industry and to encourage production.
Currently SME’s margins are very thin and industry keeps only 2 to 5 per cent of the turnover in a year, therefore extra burden in 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 Shri Thulasidharan, Chairman CITI.
Chairman 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 30th June 2017 as this would facilitate the industry’s growth.