Reimbursement of incentives under the Gujarat Textile Policy 2012, will be limited to sales within the state, and will not cover those made outside, according to the state Industries and Mines Department. A July 7 General Resolution (GR) of the Department states units will not include Integrated Goods and Services Tax (IGST), i.e. GST on inter-state sales. It will be only qualified to avail of reimbursement only for State Goods and Services Tax (SGST).

Textile is the first industry for which the incentive has been announced, while amendment of other policies for replacing VAT incentives with SGST is under process. With the introduction of GST from July 1, 2017, the state government had formed a committee to suggest modalities for SGST incentives. After considering its recommendations, the government has decided to extend SGST incentives in the form of reimbursement under the policy.

The GR also states that the unit shall not be entitled to reimbursement of IGST on inter-state supply, reimbursement of SGST input tax credit utilized for payment of IGST, and reimbursement of IGST input tax credit utilized for SGST payment. Under GST, the tax goes to the state where goods or services are consumed. The tax collected is divided equally between the state and centre.

A large textile process houses would not get any benefit of the policy because of the provision about SGST paid through cash ledger, says GST expert Monish Bhalla. ITC reimbursement is only in case of intra-state supply, which again goes against the ground reality as majority of the large units are either exporting or supplying pan-India. Meena Kaviya, board member of Association of Apparel Manufacturers and Exporters of Gujarat, welcomed the incentives and stated that sops should also be given for sales outside the state.

After many protests textile products were put in the tax bracket of 12 and 18 per cent originally, but majority of the items were moved to GST rate of 5 per cent.