MATEXTIL Calls on Government to Address Inverted GST Structure
By: Admin
July 26, 2024
Categories: GST Recent News
4 Min Read
The Man-Made and Technical Textiles Export Promotion Council (MATEXTIL) has expressed optimism regarding the recent proposals announced in the Budget, anticipating that these measures will improve business sentiment and significantly boost employment generation within the textile industry. As a representative body of the man-made fibre sector, MATEXTIL has emphasized the need for specific policy adjustments, particularly concerning the inverted GST structure, which has been a persistent hurdle for the industry.
Boosting Business Sentiment and Employment
The textile sector is poised to benefit from various proposals outlined in the Budget. These measures are designed to foster a favorable business environment and enhance employment opportunities. The Chairman of MATEXTIL, formerly known as SRTEPC, highlighted that this fiscal year’s Budget is growth-oriented, focusing on critical areas such as employment generation, skill development, and investment in the textile industry.
Addressing the Inverted GST Structure
One of the main challenges facing the textile industry is the inverted duty structure within the Goods and Services Tax (GST) framework. Currently, man-made fibres are taxed at 18%, while the key raw material yarn is subjected to a lower rate of 12%. This disparity creates financial strain on manufacturers, ultimately affecting pricing and competitiveness in both domestic and international markets. MATEXTIL has urged the government to rectify this inverted GST structure to facilitate a more balanced and equitable taxation system for the industry.
Additionally, MATEXTIL has called for a reduction in the GST rate on plastic bottles, which are essential for the production of fabrics and garments. The current tax rate of 18% on PET (polyethylene terephthalate) plastic bottles should be reduced to 5%, as these raw materials are vital for manufacturing textiles.
Credit Guarantee Scheme for MSMEs
One of the standout proposals in the Budget is the introduction of a Credit Guarantee Scheme aimed at enabling Micro, Small, and Medium Enterprises (MSMEs) to access term loans for purchasing machinery and equipment without the need for collateral or third-party guarantees. This initiative is expected to provide significant relief to the industry, particularly to small and medium enterprises that often face challenges in securing financing. By easing access to capital, the scheme will encourage investments in modernizing machinery and enhancing production capabilities.
Employment-Linked Incentives and Skill Development
MATEXTIL has welcomed the proposal to introduce employment-linked incentives and skilling programs within the textile and clothing sectors. These initiatives are expected to stimulate job creation, providing opportunities for a large number of individuals, particularly in a labor-intensive industry like textiles. The Council believes that investing in skill development will not only empower the workforce but also improve overall productivity within the sector.
The government’s commitment to provide internship opportunities for one crore youths in top companies over the next five years is a step in the right direction. This initiative aims to bridge the skills gap in the industry by providing practical experience to young professionals, ultimately contributing to a more skilled workforce in the textiles sector.
Enhancements to RoDTEP and RoSCTL Schemes
The Budget also includes an increase in the outlay for the Remission of Duties and Taxes on Exported Products (RoDTEP) and the Remission of State and Central Taxes and Levies (RoSCTL) schemes. However, MATEXTIL urges the government to consider increasing the rates under these schemes specifically for textiles and clothing. Enhanced rates will provide greater financial support to exporters, making them more competitive in the global market.
Customs Duty Reductions
Another positive development in the Budget is the reduction of customs duties on Methylene Diphenyl Isocyanate (MDI), which has been lowered from 7.5% to 5%. MDI is a crucial component in the manufacturing of Spandex Yarn, which is widely used in producing textile garments and technical textiles. This reduction in production costs will not only benefit manufacturers but also translate to lower prices for consumers, thereby stimulating demand in the market.
Conclusion
In summary, MATEXTIL views the Budget proposals as a constructive step towards enhancing the growth and competitiveness of the textile industry. However, the Council reiterates the importance of addressing the inverted GST structure and advocating for additional support measures tailored specifically to the needs of the man-made fibre sector. By fostering a more supportive regulatory environment and investing in skill development, the government can help the textile industry thrive, ultimately contributing to economic growth and employment generation in the country.
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