Indian textile industry 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 industry thanked GST Council and Textiles Minister Smriti Irani for considering the representation and bringing the entire textile job works under the service list of 5 per cent GST.
The step will come as big relief to micro and small job work manufacturers in all segments of textile value chain and will allow the free flow of business across the value chain. 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.
At the same time 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. 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. This will not encourage for usage of MMF yarn for manufacturing garments and also for increasing exports. Even there are apprehensions that Indian market would get flooded with imports from China, Bangladesh & Sri Lanka.
Hence, industry would need some safeguard measures to ensure the Make in India initiative doesn’t lose against cheap imports, as post GST, import has become 12 to 16 per cent cheaper. Industry has 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.
Further, the Ministry of Textile also announced transitional rates for Remission of State Levies (RoSL) of garments & made-ups. As a transitional arrangement for the period 1st July 2017 to 30th September 2017, the exporter may claim Remission of State Levies (RoSL) at the rates prior to introduction of GST. It will be a big relief and support for the exporters, and has so far helped in boosting exports.