The recent levies of taxes under new GST regime had brought big benefits to the composite textile units as compared to the independent textile manufacturing units. Manufacturers who are getting their goods manufactured on job basis are the worst sufferers.

They have to pay GST @18%on yarn or 5%in case of cotton , 18%on job weaving charges and also 18% on job processing charges whereas composite units are not required to pay any GST at these stages. No textile manufacturer is entitled for any refund. Means GST paid on all inputs are higher since their conversion cost is very less than payable on fabrics then no refund will be allowed. This would lead to cost escalation and make their fabrics costlier than composite units. This is for sure under the current tax regime job manufacturers who are not owning their industries will be left with no alternative other than to close their operations.

A composite manufacturer will have to pay tax only at fiber stage and then finally on fabrics against which duty paid on fiber will be set of. As against this merchant manufacturer will have to pay tax at yarn stage, weaving stage and processing stage and this altogether is more than the GST payable on fabrics. This is against the basic principal of GST that full input credit is not allowed since it results into refund.

This differentiation between composite units, weaving units and finally manufacturers on job basis would be substantial and will lead to closure of the business by job manufacturers. Government's policy had been always to safeguard the interest of the small and less resourceful merchant manufacturers whereas their this step has gone drastically against the small manufacturers and traders.

Strong representation is being contemplated to be made to the finance ministry/GST council to save this section of manufacturers from this anomaly. This is possible only if the textile services like weaving, processing should be exempted from the preview of GST. If at all this is not possible then these services should not be taxed at a rate more than the rate of output that is 5%. Small weaving units and merchant manufacturers are catering largely to the clothing needs of the poor and economically weaker section of the country.