FROM THE EDITOR-IN-CHIEF ’ s DESK …
Wherever I go today , the only conversation that I hear is about GST and its probable impact on business . No one really understands the full implications , and everyone is interpreting the document in their own unique way . But for sure there are some major concerning points that have been raised by industry experts , however the Government does not seem to be in a mood to listen , as of now …
No one is challenging the fact that GST is a major turning point for the Indian economy as it will help in bringing industries under a uniform market , reducing the tax compliance of different states under the present VAT structure . This will make carrying out business activities much easier for companies operating in more than one state . Also , economists are claiming that the GDP will rise by 1-2 % due to this reform alone .
While industries debate and confused public goes on a buying spree , as retailers announce huge clearance sales …, the textile industry is divided on how the reforms would impact business along the supply chain , though there is conviction that it would have a positive influence on competitiveness in the long run .
The two major concerns , besides the lack of tax uniformity ( fibre neutrality ) are regarding credit accumulation and indirect benefit to imported fabrics …, both of which will have a negative impact on the business .
The way GST rates stand today , there will be accumulated credit at every level , of the chain . In the hands of weavers at the time of selling greige fabric to traders , because at the input stage credit on man-made filaments and artificial yarn is 18 per cent , whereas the GST rate on greige fabric stands at five per cent . Similarly , when traders send the fabric for further job work – dyeing , printing , embroidery , and other value additions – they are deemed to be a service ( jobwork ) and are liable to a GST tax rate of 18 per cent . This results in accumulated credit in the hands of traders , where their input tax credit is 18 per cent at the processing and value addition stage , but they have to pay five per cent on processed and value-added fabric . It would have been better if accumulated tax credit in textiles was refundable in the hands of the weaver or the trader , or both .
Domestic fabric mills in centres like Surat are protesting the law as under the new GST tax structure , fabrics can be imported at a basic rate of customs duty , which is 7.5 per cent plus the five per cent GST rate . Therefore , under the new regime , imported fabric will be cheaper than domestic fabric .
Further , the GST Council ’ s decision to consider any fresh rate revision only after three months is another severe blow to the garment industry , as more than 80 per cent of the garment / made-ups manufacturing units are in the decentralized sector and undertake jobwork . There is a real fear that these units will become unviable after the imposition of 18 per cent service tax on jobwork , forcing them to close down and render hundreds of thousands of people jobless .
Another overriding concern , is whether Indian businesses and the textile supply chain in particular is ready for the implementation ?
Though several seminars , workshops are being organized and many helplines aer being created by MoT and Associations , the confidence in the same is lacking among the players . One garment exporter jokingly said to me … “ When my CA doesn ’ t understand the GST , how can I understand it ”!
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8 Apparel Online India | JULY 1-15 , 2017 | www . apparelresources . com