The Southern India Mills’ Association (SIMA) Chairman, M. Senthilkumar has thanked the finance minister and the textile minister for reducing the service tax from 18 per cent to 5 per cent.

The textile industry has appealed to the government and the GST Council for reduction of service tax on textile job work from 18 per cent to 5 per cent as over 80 per cent of the manufacturing activities in the textile value chain are carried out on a job work basis by the MSME due to the decentralized nature of the segments of textile industry. The GST Council at its 16th meeting has classified textile job work under the list of 5 per cent service tax.

Senthilkumar has said that under current tax structure, textile job works are exempted from service tax as such activities are manufacturing processing and not servicing in nature five per cent. Service tax with full input tax credit would enable the various textile manufacturing segments including reeling, sizing, power loom, handloom, knitting, yarn dyeing, fabric bleaching, mercerizing, dyeing, printing and finishing segments to set off their input credits and pay very minimal GST on services.

He said reduction of service tax from 18 per cent to 5 per cent would greatly benefit the aforesaid decentralized and MSME segment and have a level playing field with the vertically integrated manufacturing units.

Senthilkumar has appealed to the GST Council to include garmenting, made-ups and other sewn textile products also under the list (charging GST @ 5 per cent) as only textile yarns (other than MMF and filaments) and textile fabrics manufacturing activities have been classified under 5 per cent  service tax list.

SIMA chief has reiterated that the industry demand of reducing the GST rate on manmade fibre, filaments and spun yarn from 18 per cent to 12 per cent as the fabric attracts only 5 per cent GST may be considered. He said such an exorbitant rate would increase the clothing cost of the poorman’s fabrics by 5 to 6 per cent and would seriously affect the major textile clusters such as Surat, Bhiwandi, Panipet, etc., making several lakhs of people jobless.

– Apparel and Textile News, Apparel Talk, Indian Apparel