Fibre based Goods and Services Tax (GST) at the fabric or garment stage can result in a huge misdeclaration, according to Manikam Ramaswami, chairman and MD of Loyal Textile Mills Ltd. He is in favour of the GST Council imposing a 5 per cent tax on cotton fibre and said it will not make cotton textiles more expensive as all state taxes will get absorbed.

Imposing the 'one nation, one tax ' policy across India will be very good and although it is against the federal set up, the GST is good for India, stated the former Texprocil chairman.

Speaking about the effects of the lack of uniformity in tax rates of cotton and man-made fibres, he told Fibre2Fashion, "There would be a lot of issues to reduce GST for polyster which has several non textile applications. However, at the garment stage the entire GST on the fibre can be fully absorbed."

As for the impact of GST on import-export of textiles and apparel, Ramaswami said that as long as GST is paid back 100 per cent within 7 days, working capital will not get blocked.

"Other non GST costs incurred by exporters need to be given back through MEIS/drawback, cross subsidy on power, taxes on petro products used (power generation , transports etc.), higher cost of interest (Rupee interest rate over and above Dollar prime rate plus forward premium) and taxes suffered in inputs of farmers not absorbed in GST as there is no GST at lose cotton stage," he added.

"If GST is given back immediately and the drawback/MEIS is given as per the extra costs incurred by exporters then it would not impact exports negatively. In fact it could help as certain states do not refund Form W refunds for a very long time," said Ramaswami.

The 18 per cent GST rate proposed to be levied on man-made fibres is likely to have a bad effect on the textile value chain, as per Ramaswami.

J. Thulasidharan, chairman of CITI has also urged the government to reconsider the rates of MMF products and bring it at 12 per cent. India is already suffering a huge competitive disadvantage in the global textile market as the MMF based textile products are attracting higher rates of import duty. Keeping the GST rates at this rate will undoubtedly cripple hundreds of small and medium synthetic textile manufacturers, said CITI Chairman. (KD)

Source : Fiber 2 Fashion

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