Nag Vidarbha Chamber of Commerce (NVCC) has made a representation to Hon’ble Prime Minister of India and Others against increase in GST on textile & footwear from 5% to 12%. It requested that in the interest of the textile & footwear sector and society at large to take back the decision of hike in GST cute from 5% to 12% and normalise the GST on textile and footwear back to 5%. Relevant Text of the Representation is as follows:-
Sub.: Representation on increase in GST on textile & footwear.
Nag Vidarbha Chamber of Commerce (NVCC) Established in 1944, is Apex Trade Association of 13 lac traders of various trade, commerce & industry and their association’s from Vidarbha region, with mission & vision of –
Thus NVCC is instrumental in addressing the needs of business community from the region and operate as a bridge between the Central, State & Local Government and business community, so as to balance the interest of both sides.
Goods and Services Tax (GST) is a land mark legislation brought into force under your able leadership to make India a common market by “One Nation – One Tax’ theory. The noble intention of the law is to do away with multiple taxation under indirect tax and to remove the cascading effect of taxation. The implementation of GST has been welcomed open heartily by all trade bodies, traders, manufacturers. service providers and all.
We are harshly disappointed with the Notification No. 14 issued on 18.11.2021 which has increased GST on textile and footwear items from 5% to 12% on following grounds:
1. Textile industry biggest contributor to GDP
After agriculture, textile industry is the biggest contributor to the GOP of the nation and also generates largest employment to the youth of the nation. Increasing GST on textile sector from 5% to 12% wold badly impact the sector and would add to inflationary situation. The sudden hike in GST rates wef 1.122 should be withdrawn immediately. Likewise, hike in GST rate on footwears would also make it costly and out of reach of common man.
2. Boost to Parallel economy:
There was no indirect tax on cloth and textile material for years together however after lot of protest and resistance GST was introduced at 5%. The industry took few years to absorb this tax impact of GST and suddenly the govt. has increased the tax rate from 5% to 12%. This would lead to generation of parallel economy as most players would prefer to remain out of formal economy to avoid taxation and its implications. tower tax rate always is a acceptable norms and even in foreign countries the tax rate is lowest on textile items.
3. Textile is a basic necessity and increased tax rate would be inflationary;
ROTI, KAPDA, MAKAAN are the basic necessity of common mand & if Kapda (textile) is made costlier by increase in tax rate it would become difficult for common man to buy it. Further, the increase in pricing of goods would lead to inflationary pressure on the economy. It would also make the export from India unattractive and thus overall it is not in the interest of economy.
4. Issue of inverted tax structure:
The premise behind increase in tax rate as given by the government is that the input is taxable at higher PST rate and the output is taxable at lower GST rate and hence to do away this anomaly the tax rate has been increased. However, this is not the correct way of handling the situation. Even if there is an anomaly in tax rate on input and output, the manufacturer i.e the textile mills can claim GST refund from the government to get the accumulated input tax credit and hence would get benefited by the govt.
5. Taking away the benefit of PLI Scheme:
The govt. to boost the textile sector has announced Production Linked Incentive scheme (PLI) and at the same time this increase in GST rate would nullify the benefit of PLI Scheme to the mills. Thus, the intention of the govt. to boost textile sector in wake of severe competition from Bangladesh, Vietnam etc. would get severely impacted and this hike in tax rate would get wiped off. Already. the textile sector is facing huge impact of economic slowdown due to pandemic and this increase in tax rate would be a final blow to the sector.
We are very much hopeful and confident that the govt. in the interest of the sector and society at large would take back the decision of hike in GST cute from 5% to 12% and would normalise the GST on textile and footwear back to 5%
We hope that the issue highlighted above would draw your urgent attention and your timely intervention would help the trade and industry to focus on doing business and taking Indian economy to a 5 trillion economy.
We are quite hopeful of positive outcome on this representation.
CA. Ritesh Mehta
(Convenor Indirect tax Committee)