Mr. Sanjay K. Jain, Vice-Chairman CITI has welcomed the announcement made by Hon’ble Finance Minister, Mr. Arun Jaitely and Goods and Services Tax (GST) Council for reducing service tax rates for Job work services in respect of the textiles and textile products (including MMF yarn, garments, made-ups, etc. falling in Chapters 50 to 63) from 18 per cent to 5 per cent on 5th August 2017. He said, “I, on behalf of Textile Industry, thank the Hon’ble Finance Minister, Mr. Arun Jaitley, GST Council and the Union Minister for Textiles, Ms. Smriti Zubin Irani, for considering the representation and bringing all the textile job works under the service list of 5% GST. He explained that this will come as big breather to small job work manufacturers in all segments of textile value chain and will allow the free flow of business across the value chain. A common rate across the chain would also avoid confusion.
All textile job works being manufacturing activities were exempted from the service tax in Pre-GST regime. But, the job workers could not avail the input tax credit that had been increasing the cost of the products and affecting the export competitiveness and also the domestic consumers. Therefore, the industry has been demanding to classify all the textile job works under 5% GST rate service list. But, the GST Council has classified only the textile yarns (other than MMF and filament) and textile fabrics under 5% and therefore all other job works especially garments and made-up that creates 70 to 120 jobs per rupees one crore of investment especially for the rural masses and women folks were affected due to inverted duty structure. In addition, over 85% of the textile manufacturing units under take only job work. Immediately after the 20th GST Council Meeting, Hon’ble Union Finance Minister stated that all the job works across the textile value chain has been fixed at 5% irrespective of segments.
Mr Sanjay K. Jain, Vice-Chairman, CITI said that 5% GST rate on job works would enable to take full input credit and also avoid any inverted duty and strengthen the global competitiveness of the textile industry apart from benefiting the domestic consumers. He said that such a proactive response from government would enable the textile industry to become a true global player and encourage Make in India.
Garments and Made-up segments are the largest employment provider providing jobs to over 16 million people. It can create 70 to 150 jobs per rupees one crore of investment and add value by several-folds. Realizing the potential of this segment for job creation and exports, the Government announced a special package with an objective of creating 10 million new jobs for rural masses especially women by encouraging hub and spoke model in three years. This segment is also ideal to convert the self-help groups, especially rural women, into entrepreneurs so long as job works are attractive and competitive with the vertically integrated units. It may also be noted that more than 80% of garmenting jobs are carried out on job work basis by the MSMEs. Earlier with 18% GST on garments and made-ups’ job work, there were inverted duty resulting in escalation in cost to the tune of 4.25%. Therefore, CITI requested the job work GST rate for garments and made-ups should be reduced from 18% to 5%.
He also explained that reduction in tractor spares would help the cotton farmers as tractor spare parts would be now cheaper.
He further added that the much-expected reduction of GST rate for MMF & Synthetics from 18 to 12 per cent being postponed is disappointing as the production for the forthcoming quarters was eagerly waiting for this. We have apprehensions that Indian market would get flooded with imports from China, Bangladesh & Sri Lanka, which would end up in huge job losses. Imports are cheaper than domestic products as the CVD & SAD on imports. Hence, industry would need some safeguard measures to ensure the Make in India initiative doesn’t wash away in the avalanche of imports (which have post GST become 12 to 16% cheaper).
Vice Chairman CITI has urged the Government and GST Council to accommodate industries demand of 12 per cent GST rate on MMF and Synthetic Yarn or refund of duty under inverted duty incidence at fabric stage as prescribed in GST Act; as this would facilitate the industry’s growth.