From January 1st, even if the textile industry is worried about rising prices, damaging demand and causing unemployment, a uniform goods and services tax of 12% will be levied on man-made fibers and clothing.
In several statements submitted to state and central governments, trade associations across the country recommended lowering the tax rate on goods and services.Their argument is that when the industry is just beginning to recover from the disruption caused by Covid-19, it may be hurt.
However, the Ministry of Textiles stated in a statement on December 27 that the uniform 12% tax rate will help the man-made fiber or MMF segment to become an important job opportunity in the country.
It stated that the uniform tax rate of MMF, MMF yarn, MMF fabric and clothing will also solve the reverse tax structure in the textile value chain-the tax rate of raw materials is higher than the tax rate of finished products.The tax rate on man-made yarns and fibers is 2-18%, while the goods and services tax on fabrics is 5%.
Rahul Mehta, chief mentor of the Indian Garment Manufacturers Association, told Bloomberg that although the inverted tax structure will cause problems for traders in obtaining input tax credits, it only accounts for 15% of the entire value chain.
Mehta expects that the interest rate hike will adversely affect 85% of the industry.”Unfortunately, the central government has put more pressure on this industry, which is still recovering from the loss of sales and higher input costs in the past two years.”
Traders said that the price increase will frustrate consumers who buy clothing priced below 1,000 rupees.A shirt worth 800 rupees is priced at 966 rupees, which includes a 15% increase in raw material prices and a 5% consumption tax.As the goods and services tax will rise by 7 percentage points, consumers must now pay an additional 68 rupees from January.
Like many other protest lobbying groups, CMAI stated that higher tax rates will either hurt consumption or force consumers to buy cheaper and lower-quality goods.
The All India Federation of Traders wrote to Finance Minister Nirmala Sitharaman, asking her to postpone the new goods and services tax rate.A letter dated December 27 stated that higher taxes would not only increase the financial burden on consumers, but also increase the need for more capital to run the business of manufacturers-Bloomberg Quint (Bloomberg Quint) reviewed a copy.
CAIT Secretary General Praveen Khandelwal wrote: “Given that domestic trade is about to recover from the huge damage caused by the last two periods of Covid-19, it is illogical to increase taxes at this time. “He said that India’s textile industry will also find it difficult to compete with its counterparts in countries such as Vietnam, Indonesia, Bangladesh and China.
According to a study by CMAI, the value of the textile industry is estimated to be close to 5.4 billion rupees, of which about 80-85% includes natural fibers such as cotton and jute.The department employs 3.9 million people.
CMAI estimates that a higher GST tax rate will result in 70-100,000 direct unemployment in the industry, or push hundreds of thousands of small and medium-sized enterprises into unorganized industries.
It said that due to working capital pressure, nearly 100,000 SMEs may face bankruptcy.According to the study, the revenue loss of the handloom textile industry may be as high as 25%.
According to Mehta, the states have “fair support.”"We expect the [state] government to raise the issue of new goods and services tax rates in the upcoming pre-budget negotiations with FM on December 30,” he said.
So far, Karnataka, West Bengal, Telangana and Gujarat have sought to convene GST committee meetings as soon as possible and cancel proposed interest rate hikes.”We still hope that our request will be heard.”
According to CMAI, the annual GST levy for the Indian apparel and textile industry is estimated to be 18,000-21,000 crore.It said that due to the new goods and services tax rate, capital-strapped centers may only earn an additional income of Rs 7,000-8,000 crore each year.
Mehta said they will continue to talk to the government.”Considering its impact on employment and clothing inflation, is it worth it? A unified 5% GST will be the right way forward.”
Post time: Jan-05-2022