Exempt merchant exporters from IGST: Textiles Export Promotion Council

The Council welcomed govt's decision to reduce GST levy on job work to 5% now from 18%

The Cotton Textiles Export Promotion Council (Texprocil) has urged the government to exempt merchant exporters from charging integrated goods and services tax (IGST) to make India's textiles exports cost competitive in overseas markets.

While welcoming the government's decision to reduce GST levy on job work to 5 per cent now from 18 per cent earlier, Ujwal Lahoti, Chairman of Texporicil, said, "Merchant exporters cannot benefit from the facility of exports under bond/LUT (Letter of Undertaking)". There is no enabling document prescribed so far by the government under which goods can be cleared by a manufacturer without charging IGST meant for exports by a merchant exporter against bond/LUT. In absence of such a provision, therefore, the manufacturer charges IGST on the goods supplied to the merchant exporter meant for exports under Bond/LUT. In the erstwhile central excise regime, there was a facility under which a merchant exporter who has executed a bond (B-1 bond) was provided with CT 1 certificates. Introduce similar facility at the earliest so that the merchant exporters exporting under bond/LUT can get IGST free goods from the manufacturers."

The GST council, in its meeting held on Saturday, cut GST levy from 18 per cent to 5 per cent. Earlier, the GST for job works related to textile yarns, other than man-made fibres and textile fabrics, was fixed at 5 per cent, while for man-made fibres yarns and made ups/garments, the same tax levy stood at 18 per cent.

"The reduction in the GST rate for job work in the made ups and garment sectors will bring down the costs for the textiles sector across the value chain," said Lahoti.

The majority of the manufacturing activities in the textiles sector take place through job work and the reduction in the GST rate for job work has come as a huge relief for the sector.

The Foreign Trade Policy allows fulfilment of export obligations under various schemes through "third party exports". Such a provision of getting exports goods without payment of IGST from the textiles manufacturers will lead to ease of doing business and also the seamless flow of credits.

Meanwhile, Texprocil also urged the government to exempt the textile industry from furnishing bank guarantees while executing B-1 bond especially for those players who hold a membership with an export promotion council. Bank guarantee increases cost unnecessarily, said Lahoti.