Tirupur manufacturers are worried about the 18 per cent GST rate fixed for different segments in the production chain. The feeling is that this will put pressure on the working capital of the job working units, forcing them to exit the business.

Tirupur’s textile industry does business worth over Rs 50,000 crores every year, including revenue earned from exports. The industry also employs over 1,000,000 people.

Over 80 per cent of units in the Tirupur cluster are dependent on job work to carry out the various stages of garment manufacturing. The sequence of activities, from the yarn to garment is knitting, bleaching, dyeing, calendaring or compacting, printing, garmenting, embroidery and value-added activities like embellishment, glasswork, ARI work, thread work.

The product is normally transported from one stage of processing to the other at least five to seven times before getting packed for shipment or for domestic sales. At almost every stage now, 18 per cent GST will be applicable.

GST may increase costs by around two or three per cent. However the worry is not limited to costs, which can be managed through refund or passing on to the buyer. The worry is over the fate of hundreds of micro and small units, which were never under any tax purview so far.