Representative image. | Image Credit: Ravindran R. |

The center notified that higher goods and services taxes will be levied on several textile and clothing products from January 2022, which has dealt a blow to micro, small and medium-sized textile and clothing units. Industry groups claim that this move will push up consumers’ Prices and stimulate inflation.

 Sanjay K. Jain, Chairman of the Textile Committee, stated that in an industry where almost 80% of the units are in the MSME sector, fixing the tax rate on fabrics and clothing at 12% will only lead to an increase in prices for ordinary people. Indian Chamber of Commerce.

 Mr. Jain said that according to the notice, the man-made fiber (MMF) sector will face a 12% tax rate from fiber to clothing, while the cotton sector will levy a 5% tax on cotton and yarn, and a 12% tax on fabrics and clothing.

 “The industry and the market can absorb 3% to 4% interest rate hikes. But 7% is too steep and sudden. The main producers of low-cost clothing are MSME units, which may be affected by the decline in demand. In the long run, unorganized Many units in the department may withdraw from the goods and services tax network," he said.

 Although the notice issued late on Thursday was based on the recommendations of the Goods and Services Tax Commission, it was not entirely unexpected, but industry groups expressed their suggestions to the government to maintain the status quo or reduce the tax rate for the entire textile supply chain to below 5% Disappointed Mr. Jain added that it did not attract people's attention.

 Rahul Mehta, chief mentor of the Indian Garment Manufacturers Association, said the notice was both "disappointing and distressing." At a time when high raw material costs have already affected prices, this move will lead to an increase in prices for end consumers. He added that the industry has repeatedly told the government not to change interest rates in the past two months and will continue to do so.

 Although Ravi Sam, Chairman of the South Indian Textile Mills Association and T. Rajkumar, Chairman of the Indian Textile Industry Federation welcomed the move to develop an inverted tariff structure for the MMF sector, Mr. Sam said that the government should not change the cotton tax rate sector. KE Raghunathan, convener of the Federation of Indian Associations, said the government seems to have adopted a carrot and stick approach. Although it announced a production-linked incentive plan for the industry, it has increased the goods and services tax rate by 7%. He said: "A trick to punish consumers and manufacturers at once."

 Industry sources have observed that nearly 90% of fabric production in the country is in the unorganized sector. Increasing the duty rate on fabrics to 12% will hit power looms and hand looms. They added that the textile industry definitely needs additional working capital now.

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Printable version | December 15, 2021 4:37:05 AM | https://www.thehindu.com/business/Industry/gst-rates-revised-for-textile-and-clothing-sector/article37574303.ece

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