With the unified Goods and Services Tax (GST) rate on textile products set to start from January 1, 2022, the Gujarat-based textile industry fears that the price of synthetic textiles will rise by about three times.

The GST Board, at its meeting in Lucknow on September 17, decided to impose a 12% GST on all textile products except cotton to correct the inverted fee structure in the sector. The new rates will be effective from January 1, 2022.
Currently, the synthetic fiber based textile value chain is experiencing 5-18% GST at different levels. The GST rate is 18% on monoethylene glycol (MEG) and purified terephthalic acid (PTA), 12% on partially oriented polyester yarns (POY) and 5% on gray fabrics, fabrics and garments. This has resulted in a tax structure where the rate of input is higher than the rate on output, resulting in an inverted duty structure.

Experts pointed out that the inverted duty correction will lead to a smooth tax credit, making the impact benign for the entire value chain.

The biggest impact of the proposed change in tax structure will be on the man-made fiber based textile value chain, which is mainly developed in Surat and Southern Gujarat region, said Ashish Gujarati, President of Southern Gujarat Chamber of Commerce and Industry (SGCCI). We want the GST Board to reconsider its decision. The new board proposed by the council will directly affect the prices of the yarn and the weaving process. In addition to the prices of other petroleum raw materials. Gujarati said the ripple overall impact will finally be on the end users.

The SGCCI delegation recently met the Chief Commissioner of Goods and Services Tax of Gujarat who is also a member of the GST Board Preparation Committee. In representation, the SGCCI said that due to the proposed standard tax rates, government GST revenue would not increase by much but that end users would end up paying more.

According to Bharat Gandhi, President of the Federation of Indian Art Silk Industry (FIASWI), people working in the synthetic textile value chain cannot understand the GST structure applied from July 2017. Now, the government is once again introducing further changes to the tax. Gandhi said The structure that will enhance the production cost.

Not only on the industrial textile sector, the uniform tax rate will negatively affect hundreds of embroidery units as well, apart from manufacturers of silk fabrics. Hitesh Bekhadia, President of Surat Labor and Embroidery Association, said the embroidery units are already forced to increase labor rates by 10% in view of the inflated rates of petroleum products, coal and packaging materials.

With approximately 30 million meters of raw fabric and 25 million meters of processed fabric, Surat holds a 45% share of the synthetic textiles produced in India. Directly and indirectly, the synthetic textiles value chain starting from spinning, weaving, processing and apparel, provides employment for more than two million people. The city’s nearly 300 textile markets provide employment for another half a million people.

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