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Textile industry is batting for a 5% GST

Textile Industry Wants 5% GST

Coimbatore: The textile industry has urged the union government to make a uniform levy of 5% (lowest slab) on all textile and clothing products under the GST (Goods and Services Tax). They also want the government to continue the duty drawback benefits for garment and made-up exports.

The entire cotton textile value chain is currently enjoying zero per cent central excise benefit under optional Cenvat route from 2004.

“A uniform levy of 5% GST on all textiles and clothing products would ensure smooth migration of entire textile value chain to GST tax structure with full compliance, creating win-win strategy for all the stakeholders and would bring substantial revenue to the exchequer when compared to the existing revenues,” textile associations from south India said in a joint memorandum to union textiles minister Smriti Irani. “The net revenue that is being realised with the current optional central excise duty, 2% CST (central sales tax) and reduced VAT (value added tax) rate (in various states) is less than 3% of the revenue to be collected,” they said.

“This revenue will double if the GST rate is fixed at the lowest slab of 5% without any exemption across the value chain,” Southern India Mills’ Association (SIMA) said in the memorandum submitted to the minister after an interaction programme here on Friday.

“The deserving sectors like handlooms could be given the benefit of refunding of taxes under direct benefit transfer system. In addition, all the state levies like market committee cess in the nature of entry tax should also be subsumed,” SIMA said.

“Existing export benefits, including duty drawback rates and other benefits announced under garment/ made-ups export package, need to be continued for some time after the implementation of GST as the industry has just begun taking advantage of these schemes and grabbing global export opportunities,” the associations stated.

“All the existing export benefits could be continued till its expiry period in the case of apparel and made-ups package and for two years for all other export benefits, as the industry has no level playing field in the international market due to delay in concluding FTAs (free trade agreements) with various potential markets,” they said.

“Duty drawback scheme in its present shape is seamlessly reimbursing the tax incidence on input and input services. Any sharp downward revision of drawback rates may be potentially disruptive and adversely impact the global competitiveness of Indian textile and apparel exports,” Tirupur Exporters’ Association said.

Stating that the strengthening of rupee and high import tariffs of up to 20% on various textile products in almost all the major importing countries has made Indian textiles and clothing industry uncompetitive. The associations requested the Prime Minister’s Office and Ministry of Commerce & Industry to expedite conclusion of free trade agreements with all the potential importing countries, especially EU and Britain.