Southern India Mills Association (SIMA) Chairman M Senthilkumar said reduction would greatly benefit the decentralised and MSME segment and ensure a level playing field with the vertically integrated manufacturing units.
The five per cent service tax with full input tax credit would enable various textile manufacturing segments including reeling, power loom, handloom, knitting, fabric bleaching and printing and finishing segments to set off their input credits and pay very minimal GST on services, he said.
He also reiterated the demand of the industry for reducing GST rate on manmade fibre, filaments and spun yarn from 18 to 12 per cent.
Tirupur Exporters Association President Raja M Shanmugham thanked Union Finance Minister Arun Jaitley and the GST Council for the reduction.
The cut in the tax was a big relief to the knitwear garment sector as all the intermediate processes of garments were being carried out by job working units, mostly MSMEs, he said in a statement.