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Industry expects uniform 5 per cent GST rates on textile items

The textile industry has been urging the central government to decide a uniform Goods and Services Tax (GST) rate of 5 per cent for items across the textile value chain. The council is expected to reach a consensus regarding the tax structure during the two-day meeting chaired by Union finance minister Arun Jaitley, which is currently underway in Srinagar.

Over 20 textile associations led by the Southern India Mills' Association (SIMA) had recently issued a joint memorandum to the Union textiles minister Smriti Irani. A uniform levy of 5 per cent GST on all textiles and clothing products would ensure smooth migration of entire textile value chain from the present tax structure to GST tax structure with full compliance, creating win-win strategy for all the stakeholders and would bring substantial revenue to the exchequer when compared to the existing revenue.

Sriramulu Balakrishnan, MD, KG Denim pointed out saying that currently, fabrics do not attract excise duty or sales tax. Post-GST, the textiles industry expects that it should be nil rate of tax or be minimum. Representations have been made to the ministry of textiles by TEXPROCIL. Branded apparel is subject to both excise duty and sales tax.

Vikram Mahaldar, VP and global sales head of OCM believes that after the GST is imposed, mills and buyers will have to pay extra money for fabrics made from natural fibre, as they are exempt from any taxes in most part of the country. This may lead to short term decline in demand till channel stocks last, and until customers accept the change.

As for the e-commerce sector, it is likely to bring in greater convenience as GST promises standardisation for online marketplaces. "The 'one tax, one market' concept on which GST is based is expected to be a big welcome step and promising standardisation for online marketplaces to make e-commerce convenient. Jimmy Kaul, MD and co-founder of Shopotox commented on this saying that he believes that once GST comes into full effect, e-commerce sector would be structured well and the way forward will be easier.