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Web Exclusive | May 2017

Recycled PSF producers seek continuation of tax advantage in GST

The All India Recycled Fibre & Yarn Manufacturers Association, which represents 35 recycled polyester staple fibre (PSF) producers in India, has requested the Union Finance Ministry to maintain the current excise duty cost advantage of recycled PSF vis-à-vis virgin PSF, while finalising the GST rates.

In the current tax regime, virgin PSF manufacturers are levied 12.5 per cent excise duty, while recycled PSF attracts 2 per cent concessional excise duty, due to which spinners get the cost advantage of 10.5 per cent, and so opt to buy recycled PSF.

Because of the concessional rate of duty given by the Indian Government to producers of recycled PSF, the industry has continued to grow. The association has requested the finance ministry to maintain the same uniformity in the GST regime, so that the excellent work of recycling PET bottles continues, which otherwise would have harmed the environment and also ensures the survival of the industry.

According to the association, if the existing differential is not maintained, operations of the whole PET recycling industry will become unviable. As, if the cost benefit is lost, PSF buyers would prefer to buy virgin PSF, which would lead to closure of PET bottle recycling companies, which apart from destroying jobs, will also harm the environment.

The PET bottle recycling value chain provides direct and indirect employment to around 500,000 people, which includes rag pickers, scrap dealers and employees working in the industry. The industry has grown in the last ten years and the current production of recycled PSF is around 6,60,000 metric tons per annum, turnover around Rs 5,000 crore and currently recycles around 7,00,000 metric tons of used PET bottles.

These PET bottle recyclers are directly helping the 'Swach Bharat' mission initiated by honourable Prime minister Shri Narendra Modi by recycling billions of PET bottles per year, which otherwise would have been strewn all around or ended up in landfills, posing grave risks to the environment, as it takes 500 years for a PET bottle to decompose. 

If the PET recycling industry cripples due to an unfavourable GST, there will be PET bottles littered across whole of India, as rag pickers will not be inclined to picking them nor will scrap dealers be inclined to doing business in the same.
  
“First we were hit by the ban on import of PET bottle scrap, which led to a steep increase in prices of locally available PET bottle scrap and now if GST on recycled PSF is at parity with virgin PSF, this will make the survival of the PET bottle recycling industry very difficult,” BP Sultania, president of the All India Recycled Fibre & Yarn Manufacturers Association said.

“Under the circumstances, we urge Finance Minister Shri Arun Jaitley to consider our demand of continuing the tax cost advantage, when considering GST on recycled PSF. We also seek intervention of Textiles Minster Smriti Irani to convince the Finance Ministry to accept our valid demands and thereby safeguard and promote the PET bottle recycling industry,” he added.
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