GST will have little effect on prices of textile products. However, the cut in GST rates on job work done in natural fibers including cotton and woolens has provided a major relief to textile companies. The move is expected to boost domestic business and increase international competitiveness. It will reduce the tax burden and avoid inverted duty for textile manufacturers.
The relief is expected to benefit the unorganised sector, where as much as 80 per cent of the work such as stitching, weaving and knitting happens. The five per cent tax rate is applicable for job works in apparel as well as shawls and carpets. Textile groups want to know whether operations like packaging, shifting of raw materials, loading and unloading also fall in the five per cent slab. Much of such operations are contractual but still have indirect tax implications for a company.
GST has been reduced to five per cent from the initially decided 18 per cent. The lower GST slab is expected to benefit the entire value chain of the textile sector. Though the five per cent tax rate is applicable for job work in apparel as well as shawls and carpets, it’s felt the tax relaxation will benefit the unorganised sector more. Textile companies want clarification over the term job work, which could include manufacturing activities such as weaving, cutting and knitting.