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18% GST On MMF And Yarn, Severe Blow To Synthetic Sector: CITI

Local spinning, weaving and knitting industries of SMEs and unorganized sector would be losing their business and profitability

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J Thulasidharan, Chairman of The Confederation of Indian Textile Industry (CITI), appealed to Union Finance Minister, Arun Jaitley, Union Textile Minister, Smriti Irani, Textile Secretary, Anant Kumar Singh and Revenue Secretary, Hasmukh Adhia, to reduce the GST rates of Man-made Fibres (MMF) and Yarn from 18 per cent to 12 per cent.

The synthetic sector growth rate is stagnated due to various reasons such as high price, higher cost of manufacturing and competition from China, South Korea, Indonesia and Thailand. Thulasidharan elucidated that mill gate prices of MMF and yarns are higher in India in comparison to other countries. Thus this would pressurize the Indian textile producer to source these at cheaper rates from China and Indonesia.

He further added that these countries have the lowest tax and high export incentives to produce and supply MMF textile goods in the global market. “18 per cent GST rates on MMF or Yarns will have great ramification on India’s MMF fibre and Yarn industry business prospects. Small and Medium enterprises (SMEs) and unorganized mills will face severe challenges as their profits are very low,” he said.

SMEs of MMF and Yarns might not withstand the market pressure for more than three months with 18 per cent GST, as its rate on MMF is the highest among the major textile producing and supplying countries of the world.

The textiles industry is apprehensive that 18 per cent GST regime for MMF based textile industry, will eventually increase cost and inter-sectoral competitiveness. It may lead towards distortion in terms of increased cost of spun yarns from MMF and other blended fibres and iniquitous tax burden on integrated and independent units.

The threat of dumping imported goods made up of MMF and synthetic yarns in the country may also happen. He said, “18 per cent GST will make the independent producer completely unviable in competition to the integrated producer with disproportionate unabsorbed ITC.”

Disadvantage to MMF fibre and Yarn based textile goods will keep surmounting as India’s Free Trade Agreement (FTA) with ASEAN and SAFTA will allow imports of these items from countries like Indonesia, Thailand, and Bangladesh, which will offer MMF textile goods at low and cheap prices.

Lower prices and low tax incidence on MMF sector in these countries will lead to flooding of MMF and yarn based textile goods in India. China and Indonesia would be having the maximum advantage as they can supply MMF textile items to India using their preferential arrangements.

India’s preferential agreements with ASEAN countries may help suppliers from the China and ASEAN region to export MMF based textile items to India by utilizing the preferential advantage to the maximum.  He said, “Under the new GST taxation CVD applied on the imports has already been subsumed and therefore imports from FTA partners would attract lower basic custom duty”.

Therefore, the business scenario under post GST for synthetic textile goods is very gloomy and will have a serious injury to the industry compared to competing countries.

Thulasidharan stressed upon to rationalize the GST rates on a war footing basis as this will dent India’s competitiveness in MMF sector. He also said, “Local spinning, weaving and knitting industries of SMEs and unorganized sector would be losing their business and profitability that will lead to the mass scale closure of the mill, throwing lakhs of power loom weavers and other workers out of jobs”.

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