SIMA hails 5% service tax on textile job work


The textile industry has appealed to the Government and the GST Council for reduction of service tax on textile job work from 18% to 5% as over 80% of the manufacturing activities in the textile value chain are carried out on a job work basis by the MSME due to the decentralized nature of the segments of textile industry.  The GST Council at its 16th meeting held on 11th June 2017 has classified textile job work under the list of 5% service tax.


            Mr.M.Senthilkumar, Chairman, The Southern India Mills’ Association (SIMA) has welcomed the decision of GST Council and thanked the Hon’ble Finance Minister and the Hon’ble Textile Minister for favourably considering the appeal made by the Association and reducing the service tax from 18% to 5%.  He has said that under current tax structure, textile job works are exempted from service tax as such activities are manufacturing processing and not servicing in nature.  He has added that 5% service tax with full input tax credit would enable the various textile manufacturing segments including reeling, sizing, powerloom, handloom, knitting, yarn dyeing, fabric bleaching, mercerizing, dyeing, printing and finishing segments to set off their input credits and pay very minimal GST on services.  He has said that the reduction of service tax from 18% to 5% would greatly benefit the aforesaid decentralized and MSME segment and have a level playing field with the vertically integrated manufacturing units.


            Mr.Senthilkumar has appealed to the GST Council to include garmenting, made-ups and other sewn textile products also under the list (charging GST @ 5%) as only textile yarns (other than MMF and filaments) and textile fabrics  manufacturing activities have been classified under 5% service tax list.  He has said that garmenting and made ups predominantly work on a hub and spoke model and creates 70 to 150 jobs per Crore of Investment especially for the rural women and people below the poverty line.  He has mentioned that the term fabrics would apply only upto the stage of finished fabric cutting and thereafter they would be termed as garment or made-ups or any other sewn products and therefore, suitable amendment / inclusion is required  to avoid any ambiguity at a later stage.



            SIMA chief has reiterated that the industry demand of reducing the GST rate on manmade fibre, filaments and spun yarn from 18% to 12% as the fabric attracts only5% GST may be considered.  He has added that such an exorbitant rate would increase the clothing cost of the poorman’s fabrics by 5 to 6% and would seriously affect the major textile clusters such as Surat, Bhiwandi, Panipet, etc., making several lakhs of people jobless.  He has pointed out that the Indian textile industry could achieve the potential and envisaged growth rate only when the raw materials especially  synthetic fibres are made available at an internationally competitive rate.


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