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Textile industry sources termed the 5 per cent GST rate on cotton textiles as a progressive decision and one that would give impetus for the growth and development of the entire textile value chain.
Hailing the decision, Texprocil Chairman Ujwal Lahoti thanked the powers that be and the Council for accepting the suggestion put forth by the industry and keeping the rates low.
"The low rate will not only ensure compliance but encourage farmers to grow more cotton, will not cast any additional burden on the sector and above all ensure that India regains its competitiveness in the world market".
Having said that he requested the government to announce drawback rates so as to take into account the unrebated duties under GST and continue the Rebate of State Levies (ROSL) scheme for made-ups and extension of the scheme to fabrics and yarn as well.
He reiterated the Council's demand for speedy refund of Input Tax Credits on exports so exporters' funds did not get blocked.
The Southern India Mills' Association Chairman M Senthilkumar said as the textile sector has been under the optional route since 2004 and fabrics under the zero VAT rate, 5 per cent GST would bring substantial revenue and ensure tax compliance as well
The 5 per cent GST rate on cotton fibre would benefit 20 million cotton farmers, while the same rate on readymade garments below Rs 1,000 would benefit the common man.
"We hope that textile job works would be exempted from service tax considering that the units that operate in the powerloom, knitting, processing and garmenting space are predominantly decentralised and micro and small enterprises in nature," he said and added that the 18 per cent GST on man-made fibre and synthetic yarn would have an inverted duty structure problem as the fabric would attract only 5 per cent GST.
A Sakthivel, Regional Chairman, FIEO Southern Region, said the lower GST rates across products would go a long way in promoting 'Make in India'.
Further, the simplified procedure for job works by allowing movement of goods by challan would help develop the supporting ecosystem, which is much needed for the garment industry’s competitiveness.
The focus given to the domestic textile industry would give a push to exports. "We will be able to achieve $230 billion by 2020 by way of exporting more value-added products," Sakthivel said.
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