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
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.