Textile products to cost more after GST

New Delhi: Textiles products, especially those made from cotton yarn and fabric, are likely to cost more with the government setting a higher rate for them under the GST to be rolled out from July 1.

A section of the industry believes differential rates for cotton and synthetic fibre under the new indirect tax regime will lead to interpretational issues. The Goods and Services Tax (GST) Council on Saturday fixed 5 per cent rate on cotton fibre, yarn and fabric, which attract zero duty at present.

However, some states levy a value added tax (VAT) on cotton yarn and fabric in the range of 2 to 4 per cent. "The apparel industry was looking forward to a simplified tax regime under GST with an single rate for the entire value chain.

The multiplicity of rates announced will lead to interpretational issues. "Cotton value chain was largely under optional duty route. Introduction of 5 per cent tax will lead to increase in production cost," Apparel Export Promotion Council Chairman Ashok G Rajani said.

Union Finance Minister Arun Jaitley announced that all natural fibres including cotton, cotton yarn, fabrics and ready-made garments valued below Rs 1,000 have been classified under 5 per cent GST rate.

Garments valued above Rs 1,000 will attract 12 per cent tax, while it will be 18 per cent for synthetic or man-made fibres and synthetic yarn, with the fabric irrespective of fibre being classified under 5 per cent GST rate.

"As the textile industry has been under the optional route since 2004 and the fabrics have been under zero VAT rate, the 5 per cent GST rate would bring substantial revenue apart from widely broad-basing the tax net across the textile value chain and ensuring compliance," Southern India Mills Association Chairman M Senthilkumar said.

Chairman of The Cotton Textiles Export Promotion Council Ujwal Lahoti requested the government to announce drawback rates to take into account the un-rebated duties under GST and continue the rebate on state levies scheme for made ups and also extend it to fabrics and yarn.

However, Confederation of Indian Textiles Industry Chairman J Tulasidaran told PTI that the entire textiles value chain will benefit and the inflation in apparel will come down, thereby benefiting the buyers.