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Web Exclusive | July 2018

GST Council allows ITC refund to fabrics

The Goods and Services Tax (GST) Council at its 28th meeting held under the chairmanship of Union minister for railways, coal, finance and corporate affairs Piyush Goyal has recommended for allowing refund of input tax credit (ITC) to fabrics. The refund of accumulated ITC shall be with prospective effect on purchases made after notification is issued.

“Fabrics attract GST at the rate of 5 per cent subject to the condition that refund of accumulated ITC on account of inversion will not be allowed. However, considering the difficulty faced by the fabric sector on account of this condition, the GST Council has recommended for allowing refund to fabrics on account of inverted duty structure. The refund of accumulated ITC shall be allowed only with the prospective effect on the purchases made after the notification is issued,” the ministry of finance said in its post-Council meeting statement.

Welcoming the Council’s decision Confederation of Indian Textile Industry (CITI) chairman Sanjay K Jain said, “It was the need of the hour as fabric sector is already facing a lot of difficulties while competing with its counterparts in international market. CITI has been consistently requesting to the government to give relief to the fabric segment as for the overall growth of the textile sector, fabric sector plays an important role and it also generates sizeable employment opportunities—40 jobs on ?1 crore investment—which is more than any segment of the textile value chain. Hence, decision to allow refund of accumulated ITC at fabric stage due to inverted duty structure is a big relief to the textile sector.”

The Synthetic & Rayon Textiles Export Promotion Council (SRTEPC) has also termed the Council’s decision as one of a great relief to the textile industry in general and fabrics manufacturers in particular.

“In the MMF textile segment which is highly fragmented and decentralised, individual units are specialised in particular field of textiles spinning or yarn preparatory or weaving or processing or value addition and instead of carrying out the entire textile value chain they are doing part of the job only,” said SRTEPC chairman Narain Aggarwal.

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