FROM THE EDI­TOR-IN-CHIEF’s DESK…

Apparel Online - - Content -

Con­grat­u­la­tions to the in­dus­try and brownie points to the present regime for be­ing flex­i­ble in un­der­stand­ing the im­pli­ca­tions and hence, re­duc­ing the GST on ap­parel job­work­ers from the ear­lier an­nounced 18% to 5%.

There is a sense of re­lief, as this move will bring all job­work­ers along the tex­tile sup­ply chain un­der one seam­less GST… Not only this, it will also boost the morale of the in­dus­try that this Govern­ment is re­ally think­ing of them! No doubt, this is im­por­tant, but many over­look the fact that there was al­ready a clear pro­vi­sion stat­ing that man­u­fac­tur­ers/ser­vice providers/traders whose an­nual turnover is be­low INR 20 lakh need not pay any GST and for those who have a turnover of up to INR 75 lakh, can opt for the Com­po­si­tion Scheme wherein they are li­able for GST of only 2% (man­u­fac­tur­ing seg­ment). It is clearly men­tioned that the scheme has spe­cial dis­pen­sa­tion (ex­emp­tion from a rule or usual re­quire­ment) for job­work to help job­work­ers dur­ing the GST rule. I would as­sume that a ma­jor­ity of ap­parel job­work­ers would fall un­der this ex­emp­tion.

Some may argue on the need for bring­ing job­work­ers un­der GST…

But I firmly en­dorse the need as ear­lier these man­u­fac­tur­ing ac­tiv­i­ties were ex­empted from ser­vice tax, which meant that the job­work­ers could not avail the in­put tax credit, re­sult­ing in in­creased cost of the prod­ucts and a sig­nif­i­cant im­pact on the ex­port com­pet­i­tive­ness and also the do­mes­tic con­sumers. So bring­ing them un­der the low­est GST slab is be­ing widely hailed as a mas­ter­stroke.

The fight to­day be­tween fetch­ing an or­der or los­ing is in cents..., and even a cent can make the dif­fer­ence. The Govern­ment has to look at ways to cre­ate a level play­ing field for global busi­ness. It is be­ing ar­gued that im­ple­men­ta­tion of GST has di­luted most of the FTP ben­e­fits that the in­dus­try was avail­ing so far be­sides putting a huge pres­sure on the work­ing cap­i­tal.

The ar­gu­ment is that the GST sys­tem man­dates all du­ties to be paid at the time of a trans­ac­tion while re­fund for these can be ob­tained only af­ter ex­ports. This bur­dens the ex­porter with the re­spon­si­bil­ity of ar­rang­ing money for the in­puts, man­u­fac­tur­ing and pay­ment of du­ties and taxes.

Yet again the Govern­ment has come to rescue here by in­tro­duc­ing a fast-track process for the re­fund of taxes and du­ties to ex­porters, whereby 90% of the du­ties will be re­funded within seven days. Re­main­ing 10% can be claimed post-ver­i­fi­ca­tion of ac­counts by tax au­thor­i­ties. Fur­ther, ex­ist­ing draw­backs have been re­tained for a pe­riod of three months, be­fore a new for­mula is worked out.

The Govern­ment, how­ever, needs to un­der­stand that be­sides the slow mar­ket con­di­tions, search for emerg­ing and cheaper man­u­fac­tur­ing des­ti­na­tions by in­ter­na­tional re­tail­ers, stronger In­dian econ­omy, weaker dol­lar vis-à-vis the ru­pee, are all im­pact­ing the com­pet­i­tive­ness of the ex­porters.

It is hence im­per­a­tive that the Govern­ment comes up with a Draw­back scheme which cov­ers all in­put taxes not cov­ered by the GST. There is rightly a grow­ing clam­our for the con­tin­u­a­tion of Re­bate of State Levies (RoSL) Scheme, in­clu­sion of other state levies not sub­sumed in the GST and draw­back for cen­tral taxes out­side the GST purview be­sides full ac­cu­mu­lated in­put GST Tax Credit.

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