The Confederation of Indian Textile Industry (CITI) has welcomed the reduction of service tax rates for job work services in respect of textiles and textile products (including MMF yarn, garments, made-ups, etc. falling in Chapters 50 to 63) from 18 per cent to 5 per cent. The GST Council decided to reduce GST rate at its 20th meeting this month.

Sanjay K Jain, Vice Chairman, CITI thanked Finance Minister Arun Jaitley, GST Council and Textiles Minister Smriti Irani for considering the representation and bringing all the textile job works under the service list of 5 per cent GST. He explained that the step will come as big breather to small job work manufacturers in all segments of textile value chain and will allow the free flow of business across the value chain. A common rate across the chain would also avoid confusion.

Five per cent GST rate on job works would enable to take full input credit and also avoid any inverted duty and strengthen the global competitiveness of the textile industry apart from benefiting the domestic consumers, according to Jain. He said that such a proactive response from government would enable the textile industry to become a true global player and encourage Make in India. He also explained that reduction in tractor spares would help the cotton farmers as tractor spare parts would be now cheaper.

He further added that the much-expected reduction of GST rate for MMF and synthetics from 18 to 12 per cent being postponed is disappointing as the production for the forthcoming quarters was eagerly waiting for this. “We have apprehensions that Indian market would get flooded with imports from China, Bangladesh & Sri Lanka, which would end up in huge job losses. Imports are cheaper than domestic products as the CVD & SAD on imports have become IGST. 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 doesn’t wash away in the avalanche of imports (which have post GST become 12 to 16 per cent cheaper),” he said in a CITI report. He urged the government and GST Council to accommodate industries 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, as it would facilitate the industry’s growth.