SIMA hopes reduction of GST on MMF and yarn from 18% to 12%


The GST Council at its 16th meeting held on 11th June 2017 has announced 18% as the GST rate for manmade fibres, filaments and yarn.  The Council also has decided not to allow refund of accumulation of input tax credit at fabric stage that attracts only 5% GST rate.         The Council also has not included the job work on garment and made-ups related activities under the list of 5/% rate of service tax. 



The textile industry is hoping for GST Council at its meeting held on 18th June 2017 would consider the representations and reduce the GST rate on manmade fibres, filaments and yarns from 18% to 12% and also would include garments, made-ups and other sewn product related to job work under 5% GST rate of service tax.


            In a Press Release issued here today, Mr.M.Senthilkumar, Chairman, The Southern India Mills’ Association (SIMA) has stated that there will be huge accumulation of excess credit with 18% GST rate on yarn and only 5% GST rate and non-refund of accumulated input tax credit at fabric stage.  He said that this would significantly increase the fabric cost and seriously affect the independent spinning and weaving units including powerloom sector. 



            Mr.Senthilkumar has stated that an independent weaving unit having around 50 looms and producing 100% viscose fabric would incur an additional cost of over Rs.2.00 lakhs per annum with 18% GST rate on yarn when compared to a composite unit.  He has added that even with 12% GST rate on yarns, the additional cost would be Rs.1.3 lakhs per loom per year and thus creating a unhealthy competition between the composite and independent weaving units.  He has stated that the Government could have classified the entire textile value chain under 5% GST rate to avoid such problems or refund the accumulated input tax credit at every stage so that the cost is not increased, level playing field is created and ensure proper compliance. 




            SIMA chief has stated that the differential rates and non-refund of accumulated input tax credit would not only affect the industry, but also lead to wrong declaration and corruption.  Therefore, he has appealed to the government to discourage any loophole for wrong declaration and corruption and pleaded for refund of accumulated input tax credit at fabric stage to protect the interest of powerloom sector and also meet the clothing needs of poor masses of the Nation with reasonable tax burden.  He further appealed to the GST Council to include garments, made-ups and other sewn textile products job work under 5% GST rate for service tax as these segments create 100 to 150 jobs per crore of investment and thus a large scale employment for the rural masses, especially women folks are created


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