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Tamil Nadu Finance Minister Palanivel Thiaga Rajan urged the GST Council to consider reversing the hike in GST on textile. Alternatively, it may be considered that readymade garments having sale value of above ₹3,000 or ₹5,000 be taxed at the higher rate of 12 per cent and allow the present rate of 5 per cent on textiles below this level.
‘Will dampen demand’
Tamil Nadu is one of the major States producing handloom, power loom textiles and hosiery goods and this sector is next only to agriculture in terms of employment generation. Clothing is the basic necessity immediately after food.
While analysing the textile industry, there is a huge difference between man-made fibre-based industry and natural fibre-based industry. Man-made fibres are produced from chemicals through automated processes involving low labour with high capital, mostly by the corporates. However, the process of natural fibres is more labour intensive and has a downstream impact on farmers. It is also run with lower capital, mostly by the MSME sectors. The hike on the fabrics including handloom manufactured from the natural fibre will dampen demand and thereby the farmers and MSMEs will be indirectly affected.
‘Inopportune time’
Before the introduction of GST, under the VAT regime of Tamil Nadu, textiles were given full exemption throughout, and readymade garments were subjected to tax at 5 per cent.
The proposed hike in GST on textile could not have come at a more inopportune time when the industry is limping back to normalcy from the onslaught of Covid-19 pandemic.
Textile industry in Tamil Nadu is a forerunner in providing employment in the State. The handloom sector, which is barely surviving on the subsidies granted by the State government, will not be able to absorb this blow due to the increase in GST.
“The representation of the associations that the increase in GST would cause large scale unemployment in the weaving industry due to non-availability of additional loans and working capital has great merit and therefore, I request the Hon’ble Chairperson of the GST Council to kindly consider reversing the hike in GST,” he said.
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