The power loom weaving sector won’t get refund of input tax credit (ITC). ITC refunds for other segments, including textile processing, embroidery and yarn spinning, will be released soon.

Input tax credit is a relief offered under GST.

The textile industry has sought refund of the accumulated input tax credit at the fabric stage. The view is that any delay in such refund could lead to increased imports of fabrics, resulting in job losses in highly vulnerable sectors like power looms, handlooms, and processing.

The textile industry fears costs could escalate by anywhere between three per cent and five per cent which could further impact capacity utilisation.

This percentage share in cost escalation is proportionate to the range of accumulation of input tax credit on the sales value.

Apart from avoiding cost escalation, a timely refund could also avert high imports of fabrics and fall in capacity utilization, which could result in job losses.

While the power loom sector and independent weaving units that produce over 95 per cent of the woven fabric are burdened with 18 per cent GST on yarn, vertically integrated units do not have this problem as they need to pay 18 per cent GST for fibers and only five per cent GST on fabrics and the cost difference works out to five to seven per cent.