Five per cent GST rate on job works would enable the industry to claim full input credit.
New Delhi: The Confederation of Indian Textile Industry (CITI) on Monday welcomed the GST Council's move to slash the rate on job work like weaving, cutting, knitting and embroidery to 5 per cent from 18 per cent decided earlier.
The GST Council, headed by Finance Minister Arun Jaitley comprising representatives from all states, last week decided to tax all job works in the textile sector at 5 per cent. This 5 per cent rate will be applicable for job works in apparel, shawls and carpets.
In a statement, CITI Vice Chairman Sanjay K Jain described it as a big breather to small job work manufacturers in all segments of textile value chain which will allow the free flow of business across the value chain.
"A common rate across the chain would also avoid confusion. All textile job works being manufacturing activities were exempted from service tax in pre-GST regime. But job workers could not avail input tax credit that had been increasing the cost of the products and affecting the export competitiveness and also the domestic consumers," Jain said.
He said the 5 per cent GST rate on job works would enable the industry to claim full input credit and also avoid any inverted duty and strengthen the global competitiveness of the textile sector apart from benefiting the domestic consumers.
However, Jain said the reduction of GST rate for manmade fibre and synthetics from 18 to 12 per cent being postponed is disappointing. He claimed that imports are now cheaper than domestic products as the countervailing duty (CVD) and special additional duty (SAD) on imports have become Integrated GST.
"Earlier the additional duties, namely, CVD & SAD were a protection against imports. Hence, industry would need some safeguard measures to ensure the Make in India initiative does not wash away in the avalanche of imports (which have post GST become 12 to 16 per cent cheaper).
"We have apprehensions that Indian market would get flooded with imports from China, Bangladesh and Sri Lanka, which would end up in huge job losses," Jain said.
He urged to the government and GST Council to accommodate the textile industry's demand of 12 per cent GST rate on MMF and synthetic yarn or refund of duty under inverted duty incidence at fabric stage as prescribed in GST Act.