Textile Export Promotion Council of India (Texprocil) has urged the government to allow accumulated input tax credits on fabrics available with the weavers as on July 31 to be adjusted to GST payment on outward supplies in both domestic and export markets. GST Council has allowed refund of unutilised input tax credit to taxpayers in the textiles sector in the last meeting. Then, in a notification, the Central Bureau of Indirect Taxes and Customs has said the accumulated credit lying unutilised as on July 31 would gap.

Ujwal Lahoti, Chairman, the Cotton Textiles Export Promotion Council, stated cancellation of unutilised credits will lead to serious problem in the textiles sector and push up the cost of inventory. Further, manmade fibre textiles and yarn attract 18 per cent and 12 per cent GST respectively. Whereas, the GST rate on fabrics is only 5 per cent leading to accumulation of input tax credit due to inverted duty structure. Most of the dyes and chemicals and packing materials used in the textiles sector attract 12 per cent and 18 per cent GST.

As per the Central GST Act, Section 54 allows refund of unutilised input tax credit shall be allowed where the accumulation is due to inverted duty structure. While the intention of the government is to provide refund of accumulated input tax credit due to inverted duty structure and bring down the cost of products, such bifurcation the input credit accumulated before July 31 and after August 1 for the purpose of refunds has led to serious concern.

Fabrics manufacturers have waged GST on all their inward provisions both goods and services and have legitimate input tax credit and therefore it is not proper on government to let it lapse.