The consensus in the non-handloom part of the organised textile industry seems to be for a uniform goods and services tax (GST) rate. The GST
Council meets this Saturday to discuss it.
At present, the sector doesn’t have fibre neutrality in taxes. Cotton fibre has no excise; synthetic fibre has 12.5 per cent; fabric has nil. Branded garments have the option of a low rate if no input credit is claimed. The average is five to eight per cent.
Says S C Kapur, director-general, Association of Synthetic Fibre Industry, “A 12 per cent GST
is advisable for the whole value chain. Cotton and manmade fibre need to be taxed at the same rate. The government has been talking of fibre neutrality since long and implementation of GST
is the right time.”
He explains that if the entire industry is taxed at the lowest GST rate of five per cent, then input credit can't be fully claimed. Garments, being value added items, are likely to be taxed at 12-18 per cent, it is reported. Then, 80 per cent of fabric is a blend of cotton and synthetic yarn. To ensure full compliance and avoid GST arbitrage, the rate of tax for both segments should be equal, Kapur said.
The Clothing Manufacturers Association of India has, however, proposed a five cent GST rate across the value chain. This, it says, will increase the compliance from all segments which are at present out of the tax net. Those who disagree say differential rates allow scope for mis-declaration.
Narain Agarwal, chairman, Synthetic and Rayon Textile Export Promotion Council, said: “Bangladesh, Vietnam and China had implemented a 15-16 per cent GST several years ago and they are growing much faster than Indian textile industry. Hence, a uniform 12 per cent GST should not hinder growth.”