SIMA Chief, Ravi Sam also stated that the 12 percent GST on all garments and fabrics would increase the cost for the common man, especially the people below the poverty line and felt that cotton fabrics and garments below Rs.1000 could have been retained at 5 percent GST rate.
Coimbatore: In a press release issued in Coimbatore on Friday, Ravi Sam, Chairman, The Southern India Mills’ Association (SIMA) has stated that as the GST rate on MMF fibre has been reduced from 18 percent to 12 percent, it would reduce the cost of finished goods.
"The recently announced Production Linked Incentive Scheme for certain MMF fabrics, garments and technical textiles, extending the incentive ranging from 7 percent to 15 percent based on the incremental turnover for five years, the scheme warranted two pre-requisites viz., removal of anti-dumping duty on MMF raw materials and fibres and also addressing the inverted duty issues. The Government has successfully fulfilled both pre-requisites and hoped that the PLI scheme would soon become a success.
Though the PLI scheme aims at creating 40 to 50 global champions in textile trade with higher scales of operations, the reform would greatly strengthen MMF value chain to become globally competitive. Globally, the consumption of cotton and MMF fibre is in the ratio of 35:65, while the same is the reverse in India as the MMF raw materials and fibres were expensive due to anti-dumping duties and inverted duty issues. MMF would thus become the growth engine in the coming years for the growth of the textile industry in India.
The Indian textiles and clothing industry that employs over 105 million people, especially people below the poverty line and women folks had several issues on the taxation front for several decades. For the first time in history, the entire textile value chain was brought under GST net without any exemption during July 2017 that ensured compliance and created a level playing field across the value chain. Though the Government brought the entire cotton textile value chain and job work services under 5 percent GST rate, the synthetic value chain had inverted duty structure issue as the fibre attracted 18 percent, yarn 12 percent, fabric 5 percent and garments below Rs.1000 per piece at 5 percent and 12 percent for garments above Rs.1000.
This resulted in huge accumulation of input tax due to inverted duty structure. The industry had been demanding the Government to bring the entire synthetic textile value chain also under 5 pecent GST slab on par with cotton textile value chain, clothing being the most important basic needs of the people and a mass consumption item. Based on the recommendation made by the 45th GST Council meeting held on 17.9.2021, the Ministry of Finance has issued a notification on 18.11.2021 by bringing all the textile goods under 12 percent GST rate, except cotton and cotton yarn that continue to attract 5 percent GST rate, with effect from 1st January 2022.
Retaining the 5 percent GST rate for cotton and cotton yarn would greatly benefit the cotton farmers. We thank the Government for addressing the inverted duty structure for dyeing and printing of textile and textile products job work by increasing the rate from 5 percent to 12 percent. This would greatly benefit the textile processing segment, the weakest link in the entire textile value chain and job work services account for over 80 percent of the textile manufacturing activities.
12 percent GST on all garments and fabrics would increase the cost for common man, especially the people below the poverty line, and cotton fabrics and garments below Rs.1000 could have been retained at 5 percent GST rate. The increase in GST rates at fabric and garment stage would increase the working capital burden for the fabric and garment manufacturers," detailed Ravi Sam, the Chairman of SIMA.