Job works like gaja-buttoning, ironing and packing, which were tax-free earlier, come under five per cent GST’s perview now. These three job works, carried out in Tirupur at 300 registered units and many unregistered units, are significant in knitwear making. Unlike capital-intensive processing units, the units get their revenue from garment manufacturers.
However, the reduction of GST from 18 per cent to five per cent on raw materials used in textile industries is expected to benefit the knitwear industry too. Besides knitwear, the woven industry will also benefit from the reduction in the tax rate. When woven products are not doing well, hosiery products like vests and briefs suffer. So the new revised tax rate is expected to boost sales of woven products and hosiery products.
This is the right time for the knitwear sector to capture the market that’s leaving China, due to an increase in the cost of manufacturing. Tirupur is the knitwear capital of India. The share of Tirupur knitwear exports in India’s total garment exports is 20 per cent. More than 80 per cent of the industries in this sector are medium and small scale. Knitwear exports from Tirupur grew by 12 per cent in 2015-16 compared to the previous year.