Finance Minister Arun Jaitley on Tuesday rejected textile sector’s demand not to tax textiles under GST, saying the move would render domestic manufacturers less competitive against their foreign counterparts.
Jaitley also refuted claims that fabric would become costlier by up to 12% under the new tax regime.
“Nil GST on fabrics will break the input tax credit chain and then the garments/made-ups manufacturers will not be able to get the credit of tax on previous stages,” Jaitley said in Rajya Sabha in reply to a written question.
The minister said nil GST on fabrics will also result in zero rating of imported fabrics, while domestic fabrics will continue to bear the burden of input taxes.
Generally, the GST rates are equal or lower than the pre-GST tax incidence. And therefore, the price of fabrics is not likely to go up.
Traders especially from Gujarat have been demanding a rollback of taxes on textiles under GST saying it would jack up prices of fabric.
Under GST, garments and made-up clothings costing less than Rs 1,000 attract 5%, and those exceeding Rs 1,000 attract 12% levy.
Yarns made of man-made fibre or filament attract 18%.
Jaitley said the GST rate structure for the textiles sector enables ease of classification and determination of rate.
Jaitley said it was not correct to say that the textile sector was never taxed in independent India.
“In fact, during 2003-04, the entire textiles sector was subjected to central excise duty. Necessary steps have been taken to facilitate taxpayers to take GST registration. GST Sewa Kendras have been set up in various centres to handhold the taxpayers and to provide all necessary guidance regarding GST compliance,” he said.