New Delhi, July 18, 2017

Finance Minister Arun Jaitley on Tuesday said that organised traders and unorganised sellers in the textiles sector have not been affected by the GST.

“The main demand of the textile traders is not to put any tax on fabrics. However, this cannot be accepted,” he informed the Rajya Sabha, while replying to a question. Pointing out that GST rate structure for the textiles sector enables ease of classification and determination of rate, he said that zero tax on textiles would break the input tax credit chain and the garments manufacturers will not be able to get the credit of tax on previous stages.

“Nil GST on fabrics will result in zero rating of imported fabrics, while domestic fabrics will continue to bear the burden of input taxes,” he said, adding that the new rates are equal or lower than the pre-GST tax incidence. “The price of fabrics is not likely to go up,” he said. The Finance Minister also took on critics who had said that the sector has never been taxed. “It is not correct to say that textiles sector was never taxed in independent India. In fact, during 2003-04, the entire textiles sector was subjected to Central excise duty,” he said. The GST Council had decided to tax cotton fibre and other vegetable fibres at five per cent and manmade fibre at 18 per cent. Similarly, a five per cent tax is levied on all yarns and fabrics under GST, except for manmade yarn that is taxed at 18 per cent.

Readymade garments up to Rs.1,000 are taxed at five per cent while those exceeding the cost are taxed at 12 per cent.

However, textile weavers and traders have called for a roll back of the tax on the grounds that their products will become more expensive under GST.

[The Hindu Business Line]