GST on fabrics will break the input tax credit chain for the domestic industry and make imported items cheaper. Amid protests in Gujarat by textile traders who are demanding a rollback of 5 per cent GST on fabrics, Finance Minister Arun Jaitley refutes that the textiles sector was never taxed in independent India. The entire textiles sector was subjected to central excise duty, he said in Rajya Sabha.
Under the Goods and Services Tax (GST) regime yarn and fibres made from silk, wool, cotton or other vegetable fibres attract 5 per cent tax. While garments and made up clothings costing less than Rs 1,000 attract either 5 per cent or those exceeding Rs 1,000 attract 12 per cent levy. Yarns made of man-made fibre or filament attract 18 per cent GST, while he same is 5 per cent for fabrics. Jaitley stated that the GST rate structure for the textiles sector enables ease of classification and determination of rate.
The main demand of the textile trader is not to put any tax on fabrics, Jaitley says as he shot it down saying nil GST on fabrics will break the input tax credit chain and garments/made ups manufacturers will not be able to get the credit of tax on previous stages also nil GST on fabrics will result in zero rating of imported fabrics, while domestic fabrics will continue to bear the burden of input taxes.