The man-made fibres (MMF) and yarns were slotted under 18 per cent GST rate while the fabrics were slotted under 5 per cent GST slab with a condition that no refund of Input Tax Credit would be allowed at fabric stage. This was creating a huge inverted duty problem for the synthetic sector and inflating the cost of synthetic products that already had serious threat by cheaper imports. Under the post-GST regime, with the abolition of 12.5 per cent countervailing duty and 4 per cent special additional duty, the import has become cheaper. The industry has been pleading the GST Council to reduce MMF GST rate from 18 to 12 per cent to avoid the cost escalation of yarn and facilitate the power loom sector to remain competitive.
P Nataraj, Chairman, the Southern India Mills Association (SIMA), has profusely thanked the Union Minister for Textiles and Information and Broadcasting, Smriti Irani for the concerted efforts made to reduce the MMF filament yarn and MMF spun yarn including filament sewing thread GST rate from 18 per cent to 12 per cent. He also thanked Union Finance Minister and the GST Council Members for favourably considering the genuine demand made by the synthetic sector and announcing the reduced rate. He said that reduced rate of GST would greatly benefit the spinning and powerloom sector, improve global competitiveness and cloth the poor masses of the nation at an affordable cost.
SIMA Chairman also has thanked the GST Council for giving a relief for the blockage in credit of exporters that affects the cash liquidity of the exporters. He has hailed the announcement of processing the refund cheques for July exports by October 10 and August exports by October 18 and also the decision for refunding a notional amount for the remaining months and later adjust the amount in the e-Wallet while implemented from April 1, 2018.
He stated that this would resolve the problem of working capital blockage and benefit the exporters. He also added that the suspension of reverse charge mechanism till March 31, 2018 will benefit small businesses and substantially reduce compliance costs. He has welcomed the announcement of easing the compliance burden of medium and small taxpayers and increasing the eligibility of composition scheme from Rs 75 lakh to Rs 1 crore. Extending the tax exemption for 100 per cent EOU units, advance licensing scheme and EPCG scheme and also for merchant exporters with 0.1 per cent tax payment up to March 31, 2018 are few more announcements that benefit the textile industry says, Nataraj.
SIMA Chief has hoped that the GST Council would soon consider refund of the accumulated input tax credit at fabric stage especially the processed fabrics and also mandating the duty drawback committee to recommend appropriate duty drawback rates and RoSL rates to sustain the export performance. He has also hoped that the Government would extend the transitional provision of giving the pre-GST duty drawback and RoSL rates for another three months or till the new rates are announced.