Textile sector demands uniform GST tax rate of 5%

The textile industry of India has urged the government to place all products across the textile and apparel value chain under the lowest slab of the Goods and Services Tax (GST). The industry seeks 5 per cent taxes without exemptions in order to avoid all possibilities of tax evasion. The applicable rates are currently between 5 and 7 per cent.

The Clothing Manufacturers Association of India (CMAI) said in a representation to the commerce ministry that low GST rate for the textile sector will boost domestic textile production and encourage voluntary compliance.

The move will also help the country generate 35 million jobs and attract investments worth $200 billion by 2025.

The demand is essentially being made as the textile sector is the second largest employer after farming. It employs 45 million people directly and 60 million people indirectly. The textile sector also contributes 10 per cent in India's total manufacturing.

Textile items weightage in the Consumer Price Index is of 7 per cent. A uniform GST rate of 5 per cent without exemptions will put an end to blocked input taxes and tax cascading. It will also increase revenue for the government. The tax revenue across the sector could increase by Rs 7,000 crore with a uniform GST rate and 50 per cent industry compliance, said Rahul Mehta, president, CMAI.

A GST rate structure with multiple rates could result in distorting production and consumption, and compromise fibre neutrality. Producers could move on to manufacture products using fabrics that fall under the lower slab, according to a report in a leading daily.

A uniform GST rate can lead to a promising future for the textile sector, added Mehta.
By extending a uniform GST rate to fabrics, which are currently exempted, could result in the government generating Rs 10,850 crore even with only 50 per cent compliance.