GST rates revised for textile and clothing sector

Industry says the move is disappointing.

A notification issued by the Ministry of Finance on November 18, revising GST rates for several textile items from January 2022, has come as a blow to Micro, Small and Medium-scale textile and clothing industries.

In an industry, where almost 80 % of the units are in the MSME segment, fixing the rate at 12 % for fabrics and garments will only lead to higher prices for the common man, says Sanjay K. Jain, Chairman of Textiles Committee of the Indian Chamber of Commerce.

Mr. Jain said that with the notification, the manmade fibre (MMF) sector will have 12 % duty from fibre to garments and the cotton sector will have 5 % duty for cotton and yarn and 12 % for fabrics and garments.

“The industry and the market can absorb 3 % to 4 % hike. But 7 % is too steep and sudden. It is the MSME units that make the low cost garments mostly and these units may suffer from drop in demand. In the long run, many units in the unorganised sector may move out of the GST net,” he said.

The notification, which is based on the recommendations of the GST Council, was expected. Hence, the industry had represented to the government to maintain status quo or bring the entire textile supply chain under 5 % duty, he added.

Clothing Manufacturers Association of India Chief Mentor Rahul Mehta said the notification is both, disappointing and distressing to the industry. The move will lead to higher prices for the end consumer at a time when high raw material costs have already impacted prices. The industry made several representations to the government in the last two months to not change the rates. It will continue to do so.

While the Southern India Mills’ Association chairman Ravi Sam and Confederation of Indian Textile Industry chairman T. Rajkumar welcomed the move to set right the inverted duty structure for the MMF sector, Mr. Ravi Sam said the government should not have changed the rates for the cotton sector.

KE Raghunathan, convenor of Consortium of Indian Associations, said the Government follows a carrot and stick approach. While it announced Production Linked Incentive scheme for the sector, it has increased the GST rates by 7 %. “A master stroke to penalise both consumer and the manufacturer in one shot,” he said.

Industry sources added that almost 90 % of fabric production in the country is in the unorganised sector. Increasing the duty to 12 % for fabrics will hit the powerloom and handloom weavers. The textile sector will certainly require additional working capital now, they said.

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