Exporters in Tirupur want details about the tax implications of GST. The industry has numerous workers and units involved in different parts of the value chain such as printing, embroidery, washing, dyeing etc, which are taxed at 18 per cent while jobs related to yarn and fabric enjoy a five per cent rate.

They are still coming to terms with the new system and are caught between buyers and suppliers. Tirupur is India’s biggest knitwear hub and does exports of Rs 25,000 crores every year. At Tirupur, apart from the massive export orders, domestic knitwear sales amount to another Rs 12,000 crores.

Unlike exports, manufacturers don’t get input credit for domestic sales. So the 18 per cent tax for job works will have to be borne by the manufacturer, which naturally will raise the manufacturing cost and affect the fund flow. Manufacturers say that unless all the works are brought under a single slab of five per cent, they have no option but to pass it on to the consumer.

The industry was expecting a sales boost after the GST for readymade garments below Rs 1000 was fixed at five per cent. Higher cost of Tirupur garments may push big retailers turn to cheaper options in Bangladesh.