GST rates for the textile industry were met with a sense of relief, although prices of garments over Rs 1000 will rise marginally.
There is a tax of five per cent for yarn and cotton and readymade garments below the Rs 1000 mark. For garments above Rs 1000, the tax rate has been fixed at 12 per cent.
Rahul Mehta of the Clothing Manufacturers Association of India said, “The rates are satisfactory, especially as they have removed the fragmentation in the industry. It's been kept largely at five per cent with no confusion between types of fiber, though we are not too happy with the 12 per cent tax on garments above Rs 1,000.” According to Mehta, the impact of the 12 per cent tax on readymade garments above the Rs 1000 mark is not going to be significant. “The rates will remain static in the lower price category of garments, with an increase of a per cent or two in the higher category.”
He added, “Though there is no excise tax on readymade garments, the industry was still paying VAT of 5.5 to six per cent and 7 to 7.5 per cent for garments above Rs 1000. The difference in tax rate will get offset, more or less, by embedded tax credit.”
Siddharth Bindra of Biba agrees. “Getting the entire value chain under the tax net is a commendable job, and a landmark move. He added the higher tax rate for readymade garments above Rs 1000 was not likely to have a significant impact. “Most companies will be able to absorb the impact. We at Biba certainly will.”
The textile industry had been asking for a uniform tax slab of five per cent. “The impact is not only on consumers but also on millions of workers employed by the textile industry,” explained Mehta.