The synthetic and garment sectors of the textile industry were dealt a blow on Sunday, when the GST Council decided not to discuss a revision of rates.

The industry had requested a cut in GST rate on man-made fibre (MMF) and its blended yarn to 12 per cent from the announced rate of 18 per cent. It also wanted garments, made-ups and other sewn products under the ‘textile job work’ list, which will attract just 5 per cent GST. Neither wish was addressed.

The Indian Texpreneurs Federation has said it will prepare a detailed document before June 30 and draw the attention of the State government and the Textile Ministry and take it up with the GST Council. The Southern India Mills’ Association (SIMA) has said the GST Council’s decision of considering any rate revision only three months after the July 1 rollout came as a severe blow to the garmenting, made-ups and synthetic spinning sectors.

SIMA Chairman M Senthilkumar said the spinning sector is opting for the optional zero rate Cenvat route and paying 12.5 per cent excise duty for MMF.

“There will be huge accumulation of excess credit with 18 per cent GST rate on yarn and only 5 per cent GST rate on fabric and non-refund of accumulated input tax credit at fabric stage. This will result in a significant increase in fabric cost and affect the independent spinning and weaving units including the powerloom sector,” he said.

He further pointed out that an independent weaving unit with 50 looms engaged in the production of 100 per cent viscose fabric will incur an additional cost of over ₹2 lakh per annum with 18 per cent GST rate on yarn compared to a composite unit. Even at GST rate of 12 per cent on yarn, the additional cost will be ₹1.3 lakh/loom per year, creating unhealthy competition between composite and independent weaving units.

The Centre could have classified the entire textile value chain under the 5 per cent GST rate to avoid such problems or consider a refund of the accumulated input tax credit at every stage to contain the cost and ensure a level playing field amongst units in the textile industry, he added. The differential rates — besides affecting the industry — could also lead to false declaration and corruption, he said.

Reverting to the need to include job work related to garmenting and made-ups in the 5 per cent slab, Senthilkumar said: “A majority of these units are in the decentralised sector; they can ill-afford service tax at 18 per cent for the job work done. The decision to consider GST revision after three months is bound to paralyse the decentralised garment/made-ups segment, rendering several thousands jobless and closure of several hundreds of units.”

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