FM says no to lowering GST rates for textiles sector

Amid protests in Gujarat, Tirupur et al by textile traders who are demanding a rollback of 5 per cent GST on fabrics, Finance Minister Arun Jaitley has negated the idea that the textiles sector was never taxed in independent India. The entire textiles sector was subjected to central excise duty, he says. GST on fabrics will break the input tax credit chain for the domestic industry and make imported items cheaper.

Under new GST yarn and fibres made of silk, wool, cotton or other vegetable fibres have to pay 5 per cent tax. While garments and made up clothes costing less than Rs 1,000 pay 5 per cent tax and those exceeding Rs 1,000 attract 12 per cent levy. Yarns made of man-made fibre or filament attract 18 per cent GST, while he same is 5 per cent for fabrics. Jaitley stated that the GST rate structure for the textiles sector enables ease of classification and determination of rate.

Textile traders are demanding tax on fabrics to be removed completely. Jaitley has however shot it down saying zero GST on fabrics will break the input tax credit chain and garments/made ups manufacturers will not be able to get the credit of tax on previous stages also nil GST on fabrics will result in zero rating of imported fabrics, while domestic fabrics will continue to bear the burden of input taxes.