The Goods & Services Tax Council may consider rationalising levy on textile items, a move that is expected to help the sector to be more competitive in the global market.

“The Government is deeply concerned about the present status of the textile sector. Considering the labour-intensive nature of the sector, concrete steps are required. Removing tax anomaly could be one such steps,” a senior government official told BusinessLine . As of now, barring raw silk, khadi yarn and some other items, there are three rates — 5, 12 and 18 per cent — for various textile items. Though there is a refund mechanism for the exporters, it takes time and affects the exporters’ efficiency.

In countries such as China, Indonesia, and Thailand there is a single rate. It is 16 per cent in China, 10 per cent in Indonesia and 7 per cent in Thailand, making them more competitive.

There also issues with Customs duty. India has more than 300 tariff lines for textiles items making things more complex for the global buyers. “For example, Bangladesh imports yarn, fabric etc from China as it is cost effective and then produces readymade garment for the export market in a big way,” the official said.

He also said that it would be better if both rationalisation exercises are taken in Customs duty along with GST. However, according to the official, any work on trade tariff must be done very cautiously as it will be watched very carefully by global trade partners and there could be allegations of WTO norms violation.

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