GST Council announced a sharp cut in rates on the merchant services at 5 percent from 18 percent. The Cotton Textiles Exports welcomed 5 percent GST (Goods and Services Tax) on yarn and fabrics. Experts said that GST made a sharp cut in rates on the work provided by Merchants Manufactures to the retailers as well as wholesalers. This is set to allow the former claim with full input credit from the end, that would also help them to compete with the captive manufacturers.
This makes the major relief for the textiles and apparel manufacturers. Since there are several inputs were kept under the Various tax slabs, the 18 percent tax is high for the merchant services, it offers inverted duty structures that result in an adverse impact on the business.
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Rahul Mehta, the President of Clothing Manufacturers Association of India (CMAI), said,
“We had represented to the government raising possible issues and the negative impact of high duty on merchant services. We thank the government for reducing GST rate to 5 per cent on merchant services, which would help job workers survive and compete with those with captive manufacturing facilities,”
In Merchant factories, the textiles and apparel industries in India are largely dependent upon the work with over two-thirds of the volume manufactured. S Rajgopal, who is the Executive Director of the Cotton Textiles Export Promotion Council (Texprocil) said,
“The move of the GST Council will help many job workers generate self-employment. Since captive plants attracted 5 percent, it was only job work which was kept under 18 pee cent slab. So, job workers needed to be aligned with captive manufacturers. Hence, the GST rate cut on job workers is a big relief for the entire textiles industry,”
Also for this sharp cut, the Chairman of Synthetic and Rayon Textiles Exports Promotion Council, Mr Srinarain Aggarwal says that
“These are very good steps by the government, good for the highly decentralised sector. From processing of fabrics to embroidery, GST rate on making charges have been fixed at 5 per cent,”
While referring the Textile city for this announcement, the Tirupur textile hub says that 18% rate is too high and it would affect the hosiery sector badly. It makes for worrying about the 18 percent Goods and Services Tax (GST) for different segments of the production chain.
And this will put pressure on working capital of job work units and that 20-30 percent of these may have to close down. The Tirupur textile industry performs business worth at least Rs 50,000 crore every year in both export and domestic. And there are employees over a million people.