GST leads to exporters seeking lower prices on knitwear in Tirupur

By

Isabelle Crossley

Published
Jul 12, 2017

The knitwear capital Tirupur is unclear about the impact of the GST as exporters push for reduced rates on garments and textiles.

The Goods and Services Tax (GST) was brought into effect on July 1st and many southern states remain positive as to its forthcoming effects although are nervous about its finer details. The future of Tirupur as a garment and textile export hub therefore depends on how these details are worked out.

Tirupur has exports worth 25,000 crore a year and 12,000 crore of domestic knitwear sales. Whilst the GST for readymade garments under 1000 rupees has now been fixed five percent which has caused a boost in sales, this has also made importing such garments easier and some fear that this will lead buyers to look elsewhere for cheaper products that can beat the manufacturing costs in Tirupur. Moreover, there is no input credit for domestic sales. Therefore, there is much confusion over how the new tax reform will play out.

S. Saktival, Secretary of the Tirupur Exporters Association, stated that exporters “want a cut in prices” of knitwear along with details about tax implications. Saktival elaborated that they are “caught between buyers and suppliers not knowing what to do,”  and so there is a lot of work to be done to understand the real effects of the GST for the knitwear industry there.

Tirupur is situated in the Kongu Nadu region of Tamil Nadu and the trade centre accounts for approximately 90 percent of India’s cotton knitwear export, making it a major source of foreign exchange. Textiles commonly produced in Tirupur include single jersey, interlock, fleece, pique jersey, rib, and drop needle among others.