With the Goods and Services Tax (GST) Council unable to arrive at a consensus on Friday on the textiles sector, the rate announcement has been deferred to June 3. The deferment is understandably due to complexities within the entire textiles value chain, in addition to the industry's anticipation of a fibre neutral taxation across the chain.
According to textile industry representatives, differed rates for different parts of the textile value chain with some being taxed and some being exempt has led to tax evasion and flourishing of the unorganised sector. In addition, India has been a cotton heavy region in terms of fibre as compared to the global trend of a skewed in favour of man-made fibre (MMF).
Tax variation in textiles has been such that currently, while fabrics do not attract excise duty or sales in most states in India, branded apparels are subject to both excise duty and sales tax. On the fibre front, natural fibre like cotton is exempt from any tax in the country though man-made fibre draws a 10 per cent excise duty.
While most states want zero duty on cotton yarn to continue, it is anticipated that man-made fibre may still attract a five per cent incidence.
However, the real contention is with regards to input credit. "We are awaiting clarity on what kind of input credit would be given in case the branded garments vertical attracts a higher rate of 18 per cent," said A Sakthivel, former chairman of Apparel Export Promotion Council (AEPC). This gains significance amidst unorganised sector forming a large part of the textile industry, creating a gap in flow of input tax credit since the credit is not availed of, in case registered taxpayers procure inputs from unorganised sources.
The textile industry's other concern is compliance issue which may get aggravated in case of a higher rate fixed, especially at the end of the value chain.
According to the garmenting sector, the definition of 'branded garment' has also been a contentious issue. While, currently a large part of the unorganised sector also goes along in the name of branded garments by placing private labels, it is to be seen how the same would be defined under GST for better compliance across the industry.
Ahmedabad, Jul 18 (PTI) Traders in Surat today called off their two-week-long strike against the imposition of five per cent GST on textiles following the Centres assurance to look into their demand for its roll back.
Thousands of textile merchants in Surat have shut their shops since the last two weeks protesting against the new tax structure.
The announcement to withdraw the protest was made today by the traders who met Finance Minister Arun Jaitley in Delhi yesterday.
"During the meeting, Jaitley assured us that the issue of the GST on cloth will be taken up in the next GST Council meeting to be held on August 5. Thus, we have decided to call off the strike till that date," said Manoj Agrawal, a textile trader.
"If no favourable decision comes in that GST council meeting, we will think of going on strike again to raise our demand for abolishing the five per cent GST," he said.
During their demonstration in the Surat textile market, one of the biggest in the country, earlier this month, the protesters were lathicharged by the police who claimed that they were pelted with stones. PTI PJT PD NSK AAR
AHMEDABAD: The traders in Surat have called off their two-week-long strike against the imposition of five per cent GST on textiles following the Centre's assurance to look into their demand for its rollback.
Thousands of textile merchants in Surat had shut their shops for the last two weeks to protest the new tax structure.
The announcement to withdraw the protest was made yesterday by the traders who met Finance Minister Arun Jaitley in Delhi on July 17.
"During the meeting, Jaitley assured us that the issue of the Goods and Services Tax on cloth will be taken up in the next GST Council meeting to be held on August 5. Thus, we have decided to call off the strike till that date," said Manoj Agrawal, a textile trader.
"If no favourable decision comes in that GST Council meeting, we will think of going on strike again to raise our demand for abolishing the five per cent GST," he said.
Surat has one of the biggest textile markets in the country.
On July 3, thousands of protesting traders had gathered near the Ring Road in Surat, where the main market is situated, demanding the scrapping of GST on textiles.
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