Mr. P. Nataraj, Managing Director, KPR Group, who has been elected the new Chairman of the Southern India Mills’ Association (SIMA), has stated that demonetization and GST are the two revolutionary policy measures adopted by the Modi Government that will help create a healthy business environment, curb tax evasion and corruption, enhance the global cost competitiveness, and facilitate ease of doing business. He is particularly appreciative of the efforts of the Union Textile Ministry for implementing GST, classifying the entire cotton textile value chain and also all the textile job work under the lowest and seamless slab of 5%.
“The lowest rate has helped protect the livelihood of over 40 million people involved in cotton farming and trading, made cotton to remain as the engine of growth for the Indian textile industry and clothe the people of the nation at an affordable cost,” he stated.
Sounding optimistic about the trends in the near future, Mr. Nataraj said that demand for yarn in the major markets of Bhiwandi, Ichalkaranji and Kolkata has picked in view of the upcoming Diwali and hoped the market might become normal within a fortnight. Further, the unsold yarn stock lying with spinning mills is also low now.
The SIMA Chairman felt that the global cotton position will be comfortable during 2017-18 due to an increase in the area under cultivation by around 11%, with India likely to get a record crop with 15% increase in area, thanks to favorable monsoon and weather.
He referred to certain GST anomalies that need to be addressed on a war footing. Citing the example of poor offtake in the global market, he expressed concern over the FTA/PTA competitive advantage gained by competing nations such as Bangladesh and Vietnam, and high tariff rates imposed on Indian textiles and the clothing products in the major textile markets such as the EU, the US, Canada, China, etc. “The total textiles and clothing exports had stagnated around $40 billion during the last three years,” he pointed out.
The SIMA Chief appealed to the centre to refund the accumulated input tax credit at the fabric stage in order to avoid cost escalation, encourage the ‘Make in India’ initiative, reduce import of fabrics, avoid job losses, etc. Going into further details, he stated: “For processed cotton fabrics, the accumulation of input tax credit would range between 3% to 5% of the sale value. Dyes and chemicals account over 30% of the processing charge and attract 15% GST, while the fabric or job work is levied with 5% GST.”
The reduction in the GST rate on MMF spun yarn, including sewing thread filament yarns, from 18% to 12% is another anomaly that needs to be looked into.
“The powerloom sector and independent weaving units that produce over 95% of the woven fabric is burdened with 18% GST on yarn, while the vertically integrated units do not have to face this problem as they need to pay 18% GST for fibers and only 5% GST on fabrics, and the cost difference works out to 5% to 7%,” said Mr. Nataraj, while appealing to the GST Council to sort out these anomalies and refund the accumulated ITC at any stage of manufacturing, especially in the case of processed fabrics.
Highlighting another issue, the SIMA Chairman observed that the Government has yet given a mandate to the Duty Drawback Committee to recommend revised duty draw back rates and ROSL. Delving deeper into the issue, he said: “The Government has extended the benefits only up to September 30, 2017. Since there is uncertainty in the rates of benefits, export bookings are getting delayed. We therefore appeal to the Centre to extend all the export benefits till the business revives and revise the rates to ensure pre-GST export competitiveness of the industry.”
Mr. Nataraj also pointed to several teething problems in the GSTN, in terms of filing the returns and the smooth running of day-to-day operations. He also felt that the local tax authorities should be empowered to service the industry, since right now they are only forwarding the issues to the concerned GST Council Committees, causing unnecessary delays.