CA Abhishek Chopra
The vast sweep of Indian Textiles extends from the hand-woven sector on one end to the capital intensive mill sector on the other. The segments include the decentralised powerlooms, hosiery and knitting sectors; the handloom and handicrafts segments; as also the wide range of fabrics which include man-made fibres, cotton, silk, jute and wool.
Textiles for many decades have been enjoying tax exemption and have been part of unorganised economy. GST council in its meeting held on June 3, 2017 finalized rates on textile sector. The details of which is as mentioned below :
| Sr.No | Particulars | Indicated Rate of GST |
| 1. | Synthetics Yarn | 18% |
| 2. | Cotton Yarn | 5% |
| 3. | All type of fabrics | 5% |
| 4. | Readymade Garments | 12% |
| 5. | Readymade Garments up to Rs1000 | 5% (No refund of ITC overflow) |
| 6. | Silk and Jute Fibre | NIL |
| 7. | Textile Job work | 18% |
Job work related to textile industry was put under the slab of 18% as mentioned above.
Further, there was a condition which is mentioned against the rate of fabric that no refund of Input tax credit overflow will be allowed. The retrograde impact of putting the Job work under 18% was giving composite unit an edge over others. Difference of 13 % i.e. 18-5 % led to competitive advantage for composite units over job workers.Hence, disrupting the basic concept of level playing field.
The Council took note of this and in the meeting held on 11th June, 2017 the rate of textile job work was reduced from 18% to 5%.
Now, Job worker generally takes the inward supply of chemical, packing material, loading unloading services etc, the applicable rate on such goods or services are as mentioned below:
From above, it can be aptly concluded that there will be credit accumulation with Job worker since the rate of outward supply is 5% and rate of inward supply is generally 18%.
Now the moot question is : Whether the job worker can claim the refund of such accumulated input tax credit?
In my considered view, job worker can claim the refund of accumulated credit since there is no specific restriction which prohibits Job worker unlike Fabric. It can be safely concluded that intention of the Government is to allow refund since the provisions have been clear wrt Input Tax Credit.
| Sr.
No. |
Chapter | 5% | 18% |
| 10 | 52 (Cotton) | 1. Cotton [5201, 5203] 2. Cotton waste [5202] 3. Cotton sewing thread [5204] 4. Cotton yarn, other than khadi yarn [5205, 5206, 5207] 3. Cotton fabrics [5208, 5209, 5210, 5211, 5212] [With no refund of ITC accumulation] | |
| 11 | 53 (Other vegetable textile fibres; paper yarn, woven fabrics of paper yarns) | 1. All other vegetable fibres and yarns such as flax, true hemp, paper yarn, etc. [5301, 5302, 5303, 5305, 5306, 5307, 5308] 2. Fabrics of other vegetable textile fibres, paper yarn [5309, 5310, 5311] [With no refund of ITC accumulation] | |
| 12 | 54 (Man-made filaments; strip the like of man-made
textile materials) |
1. Fabrics of manmade textile materials [5407, 5408] [With no refund of ITC accumulation] | 1. Synthetic filament yarn such as nylon, polyester, acrylic, etc. [5402, 5404, 5406] 2. Artificial filament yarn such as viscose rayon, Cuprammonium, etc. [5403, 5405, 5406] 3. Sewing thread of manmade filament |
–
| Sl.
No. |
Description of Service | GST Rate | |
| 13A | Services by way of job work in relation to – a) Textile yarns (other than man-made fibre/filament) & textile fabrics b) Cut and polished diamonds; precious and semi-precious stones, or plain and studded jewellery of gold and other precious metals, falling under chapter 71 of HSN c) Printing of books (including braille books), journals and periodicals d) Processing of | 5% with Full ITC | |
| 13 | 55 (Manmade staple fibres) | 1. Fabrics of manmade staple fibres [5512, 5513, 5514, 5515, 5516] [With no refund of ITC accumulation]
|
1. Synthetic or artificial filament tow [5501, 5502] Synthetic or artificial staple fibres [5503, 5504, 5506, 5507] 3. Waste of manmade fibres [5505] 4. Sewing thread of manmade staple fibres [5508] 5. Yarn of manmade staple fibres [5509, 5510, 5511] |
Decisions in regard to Services taken by the GST Council in the 16th meeting held on 11th of June 2017
| leather |
This refund shall be challenge for the industry as well as professionals, since this segment is pre-dominantly with unorganised sector and as our Finance Minister mentioned our society is largely tax non-complaint society, it will have to be seen whether the intent is achieved or not?
(Author is a Practicing Chartered Accountant in Service tax from Ahmedabad and can be reached at [email protected])
Author Bio
IS REFUND UNDER INVERTED TAX AVAILABLE FOR ONE WHO IS A DEALER AS WELL AS JOB WORKER, FOR PRINTING DYEING ETC.
Sir, you rightly said, job workers are allowed for refund of accumulated ITC
But what if the dealer is doing both activity i.e. Job Work of textile processing and also buying fabric+ doing textile processing on it & then selling this processed fabric ?? your quick reply will highly be appreciated.
Readymade Garment under Rs. 1000 is at 5%(with no refund of ITC) but as per schdule of rate restriction refund is only Fabrics and not garments. Sl No. 18 and 19 in GST RATE SCHEDULE FOR CERTAIN GOODS
[As per discussions in the GST Council Meeting held on 3rd June, 2017]