Garment and apparel prices may increase under the Goods and Services Tax (GST) regime with ‘job work’ inviting 18% levy.

Under the current system, there is no tax on job work as it is considered a “subsequent process” in the manufacture of textile products and not a service.

However, under GST, there is 18% levy, said J. Thulasidharan, chairman, Confederation of Indian Textile Industry (CITI). He said the tax should be on the product and not on the process. Hence, the industry wanted the tax to be reduced to 5%.

M. Senthil Kumar, Chairman, Southern India Mills’ Association, said cotton knitted garments, yarn and garments will attract 5% duty under GST. The intermediary processes — knitting, processing, tailoring, printing and embroidery work — are all done through job work and attracts a 18% duty.

The increase in cost of a T-shirt due to the inverted duty is Rs 4.61.

If the rate for job work is reduced to 5%, the increase in cost of the T-shirt is just Rs 1.55 (assuming the cost of cotton yarn to be Rs 220 a kg).

In the current system, there is no tax on job work as it is considered a “subsequent process” in manufacturing of textile products and not a service. However, under GST there is 18 % duty. The duty should be on the product and not on the process. Hence, the industry wants the duty to be reduced to 5 %, said J. Thulasidharan, Chairman of Confederation of Indian Textile Industry.

“When 80% of textile production is in the SME sector and is done through job works, the units registered as job worker should be either exempted from GST or should have the rate applicable for the principal product,” said D.K. Nair, former secretary general, CITI.

The rate on man-made fibre and yarn is 18% and on fabric it is 5%. The weaver will not be able to take input credit for the entire amount.

Hence, the rate on man-made fibre yarn should be reduced to 12%, said Prabhu Dhamodharan, secretary, Indian Texpreneurs Federation. Products or processes, such as blends, and recycled PET fibre yarn that were earlier exempt or had a concessional duty now have 18% rate.

PET recycled fibre had concessional Excise Duty. Now it is placed along with regular man-made fibre and yarn and attracts 18 % rate. However, it will be mixed with cotton during spinning and the cotton yarn attracts only 5% rate, pointed out G. Arulmozhi of Openend Spinners Association.

With an inverted duty structure for man-made fibre sector, synthetic products are expected to cost higher by about 5% under GST,  Dhamodharan said.

Source: The Hindu