Synthetic textile industry divided over GST rate revision

Power loom, mills welcome rate cut; traders cry foul

The synthetic textile industry is divided in its reactions to the latest revision in the goods and services tax (GST) rates announced by the country’s finance minister, Arun Jaitley, on Friday. 

The GST Council on Friday announced a reduction in tax rates on man-made yarn from 18 per cent to 12 per cent, while slashing GST levy on job work of zari (embroidery) to 5 per cent, from the previously agreed upon rate of 12 per cent.

The GST Council also announced a slew of other measures related to the new tax regime that has completed two months now.

Further, small and medium enterprises (SMEs) with an annual turnover of up to Rs 1.5 crore have been allowed to file quarterly income returns and pay tax, instead of the current provision of monthly filings.

However, while the spinning and weaving segment of the industry has welcomed the move, the trading community is livid. 

"This is sheer lollipop for traders.  We had made 14 specific demands, of which our primary plea was to keep the trading community out of the tax net until a turnover of Rs 2 crore was realised. These have not been met.  If our demands are not met, we will have to go on a strike again," said Tarachand Kasat of the Surat-based GST Sangharsh Samiti.  There are roughly around 65,000-75,000 traders in the Rs 50,000-crore synthetic textile industry in Surat.

On the other hand, the weaving community has welcomed the tax rate revision, along with the extension of the reverse charge mechanism (RCM) till March 2018.

Commenting on the same, Ashish Gujarati, president of Pandesara Weavers Association in Surat said: "Quarterly returns for entities with a turnover of up to Rs 1.5 crore is welcome. However, this provision should have been for the entire MSME industry, irrespective of their turnover amounts."

Textile mills stated that the reduced rate of GST would benefit the spinning and power loom sector further.  

"The move would greatly benefit the spinning and power loom sector, besides improving on global competitiveness. It will also help in ensuring that the country’s poor are clothed at an affordable cost. We also welcome the announcement of processing refund cheques for July exports by October 10 and August exports by October 18, along with the decision for refunding a notional amount for the remaining months and later adjust the amount in the e-Wallet that is slated to be implemented from April 1, 2018," said P Nataraj, Chairman, the Southern India Mills Association (SIMA).

Meanwhile, the industry is still seeking refunds for the accumulated input tax credit at the fabric stage, especially for processed fabrics, besides mandating the duty drawback committee to recommend appropriate duty drawback rates and RoSL rates to sustain export performance.  

"We hope the government would extend the transitional provision of giving the pre-GST duty drawback and RoSL rates for another three months or till the new rates are announced," Nataraj further commented.