The textile industry wants the proposed 18 per cent GST rate on manmade fibers and yarns to be reduced to at least 12 per cent. The industry says fixing the GST rate for manmade fiber at 12 per cent will encourage companies to diversify from the cotton-based textile segment.
While the GST for cotton fiber and yarn is five per cent, the same as now, the tax rates for manmade fiber and yarn have been fixed at 18 per cent. Although the current tax incidence for manmade fiber and yarn producers is roughly around the same level, it doesn’t bridge the existing duty differential with cotton fiber and yarn.
The industry says the excise duty on manmade fibers is preventing domestic synthetic fiber producers from scaling up operations. They say the huge duty difference has ensured that India’s textile market remains cotton-driven, in a stark contrast with the trend globally, and has eroded the country’s export competitiveness in the manmade fiber segment.
While manmade fibers account for around 60 to 70 per cent of the world’s total fiber consumption, they make up for just 30 to 40 per cent of Indian fiber demand (with cotton textiles contributing the rest).
While the GST rate for job work in textile yarn and fabric manufacturing segments has been announced, the tax rates for job work for garments and made-ups have yet to be declared.