GST on garment making may be lowered to 5 per cent

New Delhi: The GST Council is likely to consider this week lowering of tax rates for job works for making garments to 5 per cent from 18 per cent, a source in the finance ministry has said.

The panel, headed by Finance Minister Arun Jaitley and comprising of representatives of all the 29 states, is also likely to consider removing anomaly in taxation in cases where the intermediate goods are taxed at the highest bracket than the tax on final output, the source said.

It will be the first full fledged meeting of the GST Council, chaired by Jaitley and comprising state counterparts, after the roll out of the new indirect tax reform on July 1.

The Council had on July 17 discussed, via video conferencing, hiking cess rate on cigarettes as there was some anomaly in the rate fixed earlier.

Apart from reviewing the roll out of the Goods and Services Tax (GST) regime, the 19th meeting of the Council on August 5 may take a look at streamlining the anomalies raised by the industry over the past one month, said sources, who did not want to be named.

Currently, services by way of job works in relation to textile yarns (other than man-made fibre/filament) and textile fabrics attract 5 per cent GST. Other job works in relation to garments attract an 18 per cent levy.

Sources said the Council may look at streamlining it and being all job works, including for making garments from fabric, under the 5 per cent slab. "This would help the textile sector as the final product was taxed between 5-12 per cent," the source said.

As per the rates decided by the Council, in the textiles category, silk and jute fibre have been exempted, while cotton and natural fibre and all kinds of yarns will be levied a 5 per cent GST. Man-made fibre and yarn will, however, attract a 18 per cent tax rate.

All categories of fabric attract a 5 per cent rate. Man-made apparel up to Rs 1,000 will attract a 5 per cent tax and those costing above Rs 1,000, will attract 12 per cent.