Laghu Udhyog Bharati, an all India organization of the micro and small scale industries, has urged the Union Finance Minister, Nirmala Sitharaman to restore the goods and service tax (GST) rate of 5% on textile fabrics.
In a letter to the Union Finance Minister, Laghu Udhyog Bharati stated that the notification has been issued with the new GST tax rates on textile fabric including apparel increased from the existing 5% to 12% with effect from January 1, 2022. The sharp increase in the GST rate was not expected and this has put the entire textile industry in a state of shock and fear.
According to the apex body, the steep increase in the GST rate from 5% to 12% would make the textile fabrics quite costlier for the ultimate consumer and would impact their purchasing power demand and in turn, would hit the industrial supplies which may result in the closure of the industries.
At present, the cotton fibre, yarn, fabrics and apparel are taxable at a 5% GST rate, whereas there is an inverted rate structure in the man-made fibre (MMF) value chain attracting GST rate of 18% on yarn, 12% on synthetic fabric and 5% on apparels. However, there is an inherent accumulation of credit downstream of the value chain and there has to be a uniform rate structure of 5% in the MMF sector.
Due to the inverted GST tax structure, the textile fabric manufacturers would be less competitive as compared to other countries like Bangladesh, Vietnam, China, Indonesia, etc. This will adversely impact the volume of export and would hamper foreign exchange earnings. In this scenario, the $100 billion export target fixed by the Textile ministry is quite difficult to achieve.
Baldev Prajapati, national president of Laghu Udhyog Bharati said, “There is a lot of resentment among entrepreneurs from the textile centres including Coimbatore, Tirupur, Surat, Ahmedabad, Bhiwandi, Ichhalkaranji, Burhanpur, Indore, Pali, Balotra and Jodhpur following the increase in GST rates on textiles. A delegation of six members from Tamilnadu, Gujarat and Rajasthan will be meeting the Finance Minister to discuss the issue.”
