The Confederation of Indian Textiles Industry (CITI) has pitched for lower GST rate on man-made and synthetic fibre at 12 per cent.
CITI Chairman J Thulasidharan said the steep 18 per cent levy set by the Goods and Services Tax Council has come as big blow to small fabric manufacturers in powerloom, knit and processing segments, and prevent seamless flow of input tax credit and allow breakage of value chain.
He requested Finance Minister Arun Jaitley and Revenue Secretary Hasmukh Adhia to address the issue of 18 per cent GST slab on MMF and synthetic yarn on urgent basis as this will affect the MMF textile prospects in the country in a big way.
The chairman explained that MMF and synthetic textile manufacturers will not only lose profit but gradually start losing grounds against the competitors like China, Bangladesh, Vietnam and Cambodia who enjoy fiscal and non-fiscal advantage in their countries compared to India.
"Around 166 countries have GST in place with lower slab compared to what India has announced," he said.
Power loom accounts more than 86 per cent of the total man-made fabric production in India, while rest comes from other segments like handloom, hosiery & mills.
"If rates are not reduced there will be flooding of the fabrics from China, which would wipe out powerlooms and other SME fabric manufacturers from business. Power looms alone employs around 65 lakh workers in 5.5 lakh units spread across the country," Thulasidharan said.
The chairman also highlighted that it is the SME and those who do not have composite mills are going to suffer from excessive competition and high cost.
These players have majority share in fabric production of the country. Therefore, he requested that the government must ensure lowest rates on the raw materials, essentially for man- made fabric segment to hold the investment in the industry and to encourage production.
Currently the profit margins of SMEs are very thin and industry keeps only 2 to 5 per cent of the turnover in a year, therefore extra burden in form of extra taxes will add to the woes of the industry.
"High rates on MMF and synthetic yarns would inevitably affect the actions and incentives of the SMEs of the textile to remain in the business," said Thulasidharan.
He also requested that the highly labour oriented garment and made up segments be considered under the 5 per cent GST slab of service tax as the job work related these segments still come under 18 per cent service tax slab.
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