With a unified goods and service tax (GST) rate on textile products set to kick in from January 1, 2022, Gujarat-based textile industry fears that synthetic textile prices would surge by nearly three times.
The GST Council, at its Lucknow meeting on September 17, has decided to impose 12% GST on all textile products except cotton to correct inverted duty structure in the sector. The new rates will be effective from January 1, 2022.
Currently, man-made fibre-based textile value chain is witnessing 5-18% GST rate at different levels. GST rate is 18% on mono-ethylene glycol (MEG) and purified terephthalic acid (PTA), 12% on polyester partially-oriented yarn (POY) and 5% on grey fabric, finished fabric and garments. This has led to a tax structure where the rate on inputs is higher than that on the outputs, leading to inverted duty structure.
Experts have pointed out that correction of inverted duty will lead to seamless input tax credits, making the impact benign on the entire value chain.
Biggest impact of the proposed change in tax structure would be on man-made fibre-based textile value chain, mainly developed in Surat and South Gujarat region, claimed Ashish Gujarati, president of South Gujarat Chamber of Commerce & Industry (SGCCI). “We want the GST council to rethink its decision. The new slab suggested by the council would directly affect the prices of yarns as well as the weaving process. Besides, prices of other petroleum-based raw materials. Overall cascading impact would finally be on the end users,” Gujarati said.
Recently SGCCI delegation met Gujarat’s Chief Commissioner of GST who is also member of GST Council’s fitment committee. In the representation, SGCCI said that due to proposed uniform tax rates, the government’s GST revenue wouldn’t increase much but the end-users will end up paying more.
According to Bharat Gandhi, president, Federation of Indian Art Silk Weaving Industry (FIASWI), people working in the synthetic textile value chain could hardly understand the GST structure implemented from July 2017. Now the government is again coming up with further changes to the tax structure which is going to enhance production cost, Gandhi said.
Not only synthetic fabric segment, uniform tax rate would adversely affect hundreds of embroidery units also, apart from silk fabric makers. Already embroidery units are forced to increase job-work rates by 10% in view of inflated rates of petroleum products, coal and packaging materials, said Hitesh Bhikhadia, president of Embroidery job-work association in Surat.
With nearly 30 million metres of raw fabric and 25 million metres of processed fabric, Surat commands a 45% share in synthetic textile produced in India. Directly and indirectly, the synthetic textile value chain right from spinning, weaving, processing and garmenting provide job opportunities to more than two million people. Nearly 300 textile markets in the city provide employment opportunities to another half a million people.
