Ludhiana’s textile sector struggling with tax anomalies

The industrialists are seeking the removal of the 11 per cent import duty on raw cotton, which was introduced in October 2021.

The spinning industry in Ludhiana, which plays a crucial role in the city’s and the region’s financial and economic growth, is currently facing a major crisis primarily due to duty and tax anomalies.

The inverted duty structure on MMF (Man-Made Fibre) chain is causing significant issues. Raw materials like viscose and polyester staple fibre are taxed at 18 per cent, while the yarn is taxed at 12 per cent. This results in a huge accumulation of GST refunds, leading to a blockage of working capital and an inability to take GST credit on capital goods. The process for obtaining refunds is also time-consuming and cumbersome. These factors increase the cost of the final product, making imports more competitive compared to domestic products. Reducing GST on raw materials to 12 per cent from the current 18 per cent, without causing any revenue loss to the government.

Polyester staple fibre is not included in the ASEAN FTA (Free Trade Agreement), and thus, it is imported at a fully duty rate of 5.5 per cent. On the other hand, polyester spun yarn is included in the FTA and cleared at zero duty. This lack of balance prevents domestic producers from competing with finished goods. Removing polyester spun yarn from the ASEAN FTA or adding polyester staple fibre to the FTA to address this issue.

The industrialists are seeking the removal of the 11 per cent import duty on raw cotton, which was introduced in October 2021. Additionally, they express concerns about the delayed implementation of the BIS standard on polyester spun yarn (IS 17265), which is now scheduled for October 5.

To address these pressing issues, the leading industrialists have approached Rajya Sabha MP from Ludhiana, Sanjeev Arora, seeking his assistance in communicating their problems to the government and finding a resolution. Their goal is to sustain the existing industry and attract fresh investments in the textile sector.

News source: KNN