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GST Council's decision to correct inverted duty structure to cut tax burden of apparel industry: AEPC

20 Sep 2021 Evaluate

The Apparel Export Promotion Council (AEPC) Chairman A Sakthivel has said that the decision of the goods and services tax (GST) Council to correct the inverted duty structure on textiles from January 1, 2022, would help reduce tax burden on manmade fiber (MMF) fabrics and garments. He said the decision will bring a huge relief to the industry.

Sakthivel said the inverted duty structure has been an issue with the apparel industry and that the council had made recommendations to the government for the elimination of this anomaly that has been resulting in input tax credit accumulation blocking crucial working capital for businesses. He also said inputs into the MMF fabric segment (fiber and yarn) attract a GST rate of 18 percent and 12 percent whereas the GST rate on the MMF fabric is 5 percent and that for the finished goods apparel is 5 percent and 12 percent.

AEPC Chairman further said it creates a tax structure where the rate on inputs is higher than that on the outputs and this increases the effective rate of taxation of MMF fabrics and garments and violates the principle of fiber neutrality. He also said that the GST Council's decision to extend the validity of GST exemption on the transport of goods by vessel and air from India to outside India till September 30, 2022, will partially help soften the impact of the current exorbitant freight costs.

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