Today, all textile associations of South India submitted a joint memorandum to Smiriti Irani, honorable textile minister at Raddison Blu, Avinashi road. The textile association despite being appreciative of various measures taken by the government such as Power Tex India scheme for power looms, revamping CCI’s commercial activities and more importantly organizing a mega international event, Textile India 2017, had some concerns. Some of the points put forward in the memorandum addressing the same are-
5% GST rate for all textile goods and services
The entire cotton textile value chain is currently enjoying the zero per cent central excise benefit under optional Cenvat from 2004. Under this scenario, a uniform levy of 5% GST on all textiles and clothing products would ensure smooth migration of textile value chain from the present tax structure to GST tax structure with full compliance, creating win-win strategy for all the stakeholders. This would bring substantial revenue to the exchequer when compared to the existing revenue.
The net revenue that is being realized with the current optional central excise duty, 2% CST and reduced VAT rate (in various States) is less than 3% of the revenue to be collected. This revenue will double if the GST rate is fixed at the lowest slab of 5% without any exemption across the value chain. The deserving sectors like handlooms could be given the benefit of refunding of taxes under direct benefit transfer system. In addition, all the State levies like Market Committee Cess in the nature of entry tax should also be subsumed.
Continue drawback benefits and garment/ made-up package export benefits under GST regime
All the existing export benefits including AIR duty drawback rates, ROSL benefits, MEIS, IES, EPCG and other benefits announced under garment/ made-ups export package need to be continued for some time after the implementation of GST as the industry has just begun taking advantage of these schemes and grabbing global export opportunities. All the existing export benefits could be continued till its expiry period in the case of apparel and made-ups package and for two years for all other export benefits, as the industry has no level playing field in the international market due to delay in concluding FTAs with various potential markets. Option could be provided to the exporters by announcing two AIR drawback rates and ROSL rates, one while availing GST credit and another without GST credit. In addition, 1% drawback rate benefit extended for cotton with zero rate of duty should be extended in case cotton is exempted from GST. The various other taxes and levies like electricity tax, taxes paid on fuels and consumables, Market Committee Cess, etc., that might not be subsumed under GST should also be refunded with suitable drawback rates after the implementation of GST.
Expedite conclusion of FTAs with the potential importing countries
The strengthening of Rupee and high import tariffs up to 20% on various textile products in almost all the major importing countries make Indian textiles and clothing industry uncompetitive. In addition, as per WTO norms and GST tax structure, the various export subsidies and benefits that are not WTO compatible need to be phased out in a shorter duration. Therefore, the Ministry of Commerce & Industry and Prime Minister’s Office to must conclude FTAs with all the potential importing countries especially EU, Britain, China, USA, Canada, etc., to enable us to compete with the countries like Vietnam, Bangladesh, Pakistan etc.
The textile association hopes that the honorable minister pays heed to their concerns and takes necessary action as soon as possible.