FROM THE EDITOR-IN-CHIEF’s DESK…
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.