BUSINESS | Taxation

Amid protests, Jaitley says won’t cut GST rates for textile sector

Finance minister Arun Jaitley on Tuesday ruled out meeting the main demand of the textile traders not to put any tax on fabrics under GST.

Textile traders have been protesting against GST in many parts of the country. GST council has imposed 5 per cent tax on fabrics.

“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,” said finance minister in a written reply to the Parliament.

Mr Jaitley said that zero GST on fabrics will result in zero rating of imported fabrics, while domestic fabrics will continue to bear the burden of input taxes.

“It is not correct to say that textiles sector was never taxed in independent India. In fact, during 2003-04, the entire textiles sector was subjected to central excise duty,” said the finance minister.

“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,” he said. Under the GST regime yarn and fibres made from silk, wool, cotton or other vegetable fibres attract 5 per cent tax.

While garments and made up clothings costing less than `1,000 attract either 5 per cent and those exceeding `1,000 attract 12 per cent levy. Yarns made of man-made fibre or filament attract 18 per cent GST, while the same is 5 per cent for fabrics.

Finance minister said the GST rate structure for the textiles sector enables ease of classification and determination of rate.