Garment units in a fix over confusion in GST rates on job work

The GST Council on June 11 said tax on services by way of job work in relation to textile yarn and fabrics had been brought down to 5%, but the sector suspects it could fall in 18 per cent bracket.
Claiming that the the confusion over tax rates on job work on garments has not been addressed, the textile industry has knocked the doors of the Ministry, seeking a clarification on the issue.

At the June 11 meeting, the GST Council had said that services by way of job work on textile yarns (other than man-made and filament) and textile fabrics would be brought down to five per cent from 18 per cent

But the textile sector thinks that processes such as stitching, printing, embroidery might still attract 18 per cent, not five per cent. Their reason for their worry these processes come into play after the fabric is converted to a garment.

A senior industry representative from Tirupur says this confusion has arisen because the notification calling for a reduction in the GST rate from 18 per cent to five per cent stops at the fabric level and is silent on the rate applicable on job work carried out on garments.

Tirupur Exporters Association has made a representation urging the government to clarify the actual rate applicable to such job work.

Confederation of Indian Textile Industry's (CITI's) Chairman, J Thulasidharan said that the industry is apprehensive about the made-up and garment sector, as the job work on these still comes under the 18 per cent tax slab.

"This will have a serious implication on the cost of the final goods of made-up and garments, rendering them uncompetitive in the domestic and international markets," he said, adding that these products ought to be brought under the five per cent GST slab.

Specialty textile fabrics like impregnated, coated, covered or laminated remain under the 12 per cent GST slab which is unsustainable and will have huge bearing on the final cost, Thulasidharan said.

The Confederation's unfulfilled demand of reducing GST on man-made fibre and yarns to 12 per cent or refund of inverted tax at the fabric stage will be a win-win situation both for industry and Government once implemented, Thulasidharan said. It would enable textile manufacturers to absorb the cost and the government not lose out on revenue either.

As an alternative, the industry suggested that if the government is unable to revise the MMF rates, then it must allow refund of unutilised credit accumulated at the stage of fabric manufacturing to the extent of five per cent. This has been provided for under the GST Act, where GST Council has been empowered to recommend the refund of unutilised credit under inverted duty structures.

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