Interactive Meeting on the Goods and Service Tax (GST) Roadmap for the Indian Textiles Sector 16 pril

!"1#$ %e& 'elhi Record of 'isc(ssions Mr ShishirJaipuria, Chairman, FICCI Textiles & Technical Textiles Committee, chaired the meeting and welcomed the participants. He explained that the Ministry o Textiles had commissioned a study on !ST to "&# and $a%ir &d'isors last year. FICCI had (een in'ol'ed in the study right rom the stage o its inception o the proposal. The dra t report o the study is ready on which presentation is (eing made to the industry. He also mentioned that the competiti'eness o Indian exports depend on num(er o actors li)e re orm in la(our laws, upgradation o in rastructure relating to power, ports and roadsetc. *ut,one o the crucial actors that would determine the competiti'eness o our manu actured goods exports and also the domestic industry is the !ST. "arly implementation o the !oods and Ser'ices Tax +!ST, is critical in this context. &s ar as textiles sector in India is concerned, Mr Jaipuria said that it is going to (e a challenging tas) to arri'e at a consensus on !ST rates or the sector gi'en the existing distortions in tax structure in the sector and also due to (rea) in the input tax credit chain. Mr Satya-oddar rom "&# said that textiles is an important item in the consumer (as)et and in his opinion the sector should not (e excluded rom the !ST.He urther said that the dra t report is di'ided into two parts. The irst part .uanti ies the current taxation regime or the textiles industry. The second part o the report pro'ides se'eralpolicy options or Indian textile industry. The study is (ased on the nine segments o textiles sector in India as classi ied under /ational &ccounts. -resentation was made (y 0r Sri'asta'a rom "&# on !ST 1oadmap or the Textiles Sector. 0r Sri'asta'a mentioned that usually there ha'e (een the ollowing .uestions2concerns raised (y the sta)eholders with regard to the !ST3 &re the new rates going to (e more than the existing ones4 /eed or ha'ing more di erentiation in the segments2sectors How would it a ect di erent consumer segments4 The e.uity issue. 1e'enue authority is concerned that that the textiles sector contri(utes 567 o pri'ate inal consumption expenditure (ut contri(utes miniscule amount to the tax re'enue. $hat should (e the design o the !ST4

0r Sri'asta'a urther added that since the tax data or textile sector especially at State le'el was not a'aila(le, except the excise duty data, one had there ore estimated the current tax re'enue or the sector. The study has compared the estimated re'enue under the current tax regime and then compared it with the potential tax re'enue under the !ST regime. &lso, it was stated that dual !ST model will (e ollowed i.e. State !ST +S!ST, and the Centre !ST +C!ST,.

&s regards the presentation made (y 0r Sri'asta'a ollowing o(ser'ations and .uestions were made (y the industry3

8iscose i(re to (e explicitly mentioned in the segment o textiles in the report along with other Man9made i(res &s synthetic i(res are considered as petrochemical products, it needs to (e emphasised that these products should not (e di erentiated under !ST In case o non9textile inputs, it was clari ied that transport is a ma:or component o which uel2petroleum cost is a ma:or su(9component. It was urther clari ied that uels li)e petroleum, &TF and diesel are li)ely to (e out o the !ST net 0yeing orms a su(stantial part o the input cost o a(ric. Mem(ers sought clari ication on whether 0yeing would (e considered as non9textile or textile inputs4 It was clari ied that dyeing would (e considered as non9 textile ser'ice input. It was clari ied that under the current design or !ST, electricity duty is also not included Many mem(ers .uestioned the estimated 6.57 current e ecti'e tax rate or Cotton textiles, saying that it needs to (e reloo)ed as the actual incidence is higher. &lso, the incidence on 1eadymade garments which are predominantly cotton (ased is shown to (e higher than the cotton textiles, which should not (e the case in Indian context Mem(ers also sought clari ication on the treatment o exemptions under !ST. area (ased

;uestions were as)ed whether cotton textiles would continue to get pre erential treatment under the !ST as against man9made i(res4 It was clari ied that this di erentiation will no longer exist under the !ST regime. In case o hosiery, which is a common man<s product li)e innerwear, what would (e treatment under !ST4 From the current scheme o thought on !ST design, it seems that impact on hosiery sector is going to (e signi icant. &nd since ma:ority o the industry is unorganised, it will urther dis9incenti'ise the players to come in the organised sector i the incidence

is going to (ehigher. So or such common man products and necessities, there has to (e some lower rate o tax. Suggestion was made that we need to also consider the possi(ility o power loom sector see)ing exemption rom !ST. $hat could (e the alternate i that happens4 Industry also sought clari ication on whether exemption limit as is the case currently, will continue under the !ST4 I so, then what would (e the threshold4 It was clari ied that only exports would (e %ero rated under the !ST C80 and 8&T on the Capital goods will get the re(ate under the !ST Mr -oddar suggested that let there (e one rate or the entire textile 'alue chain and i we suggest di erent rates then it will urther ragment the industry Industry<s apprehension is that currently, under the draw(ac) whate'er little support is a'aila(le to the industry (esides the credit o duty on inputs, that will no longer (e a'aila(le which will impact the export competiti'eness. In such a scenario, industry needs to suggest more export promotion schemes to compensate or the loss o support under the !ST or exports. Mr J = *atra, &d'isor9 Taxation, FICCI and ormerly with C*"C as Mem(er made the ollowing o(ser'ations on the discussions3 >nli)e the SSI sector where goods upto a 'alue limit o 1s 5.? crores in a inancial year are exempt, the exemption schemes or textiles sectors are designed to (ene it speci ic segments +handlooms, powerlooms, small processors, hosiery etc,. There was a need or understanding the exemptions currently a'aila(le in each and e'ery segment and then analysing the impact o !ST on each segment and suggesting a new exemption criteria. Standard rate o !ST is not li)ely to (e 5@7A (ut is expected to (e in the range o 5B9@C7. Merit rate will (e lower say B9D7. Textiles sector is li)ely to (e le'ied to the standard rate. FICCI in its paper on !ST has suggested single rate or all productsand suggested mem(ers to ha'e a loo) at that paper which is a'aila(le on the we(site and is also attached. The Chairman concluded the meeting with the remar)s that although industry was in a'our o the !ST (ut all e orts need to (e made to reduce the ad'erse impact o the same especially in 'iew o the act that certain segments o textiles are either exempted rom duty or ha'e concessions in textile 'alue chain. " orts should (e made to ha'e the entire 'alue chain in the lowest tax rate category under the !ST, Chairman emphasised. Chairman said that FICCI will su(mit its

detailed position or !ST or textiles sector (y EC &pril @C5F to the !o'ernment and he re.uested the mem(ers to send their suggestions on the presentation and report to FICCI at the earliest. The detailed dra t report is also attached or the re erence o mem(ers. The list o participants is in the addendum.

'')%'*M +IST ,- . RTI/I. %TS Mr.ShishirJaipuria, Managing 0irector, !inni Filaments Gimited Mr.J =*atra, &d'isor, FICCI Mr.Satya-oddar, -artner, "rnst & #oung -'t. Gtd. Mr.Sri'asta'a, "rnst & #oung -'t. Gtd. Mr.0 =/air, Secretary !eneral, CITI Mr.8i:ayMathur, &dditional Secretary !eneral, &pparel "xport -romotion Council Mr.SSridhar, Chie Financial H icer, Mahara:a Shree >maid Mills Gimited Mr.1 =8i:, &d'isor9 -olyester, Indo 1ama Synthetics +India, Gimited Mr.1a: =umarJain, Managing 0irector ,Ionac =nitting Machines -'t. Gtd. +FHHM&, Mr.# J=im, Managing 0irector, -CI Ms.8eena8aish, Managing 0irector, Sa9 8eena Mr.MilindHardi)ar, "xecuti'e 0irector9&d'anced Textiles, $elspun India Gimited Mr.-ina)iMu)her:ee, Sr. 8 -, M$ Corp. Gimited Mr. 1a:eshChopra, Sr. 8ice -resident, 8ardhman !roup Mr.-arasJain, Sr. 8 - 9 Tax, $elspun India Gimited Mr.&:aySardana, 8ice -resident, !rasim Industries Gimited Mr.Mani1amamurthy, 8 - 9 F&&, G I & Fung India Mr.1ahul&charya, Sr. Manager, "rnst & #oung -'t. Gtd. Mr.-rati)Jain, -artner, =-M! Mr.-rashant&garwal, Joint Managing 0irector, $a%ir &d'isors -ri'ate Gimited Mr.&rindamSaha, &ssociate 0irector, $a%ir &d'isors -ri'ate Gimited

Mr.Tarrung=apur, Consultant, "rnst & #oung -'t. Gtd. Mr.SachinSharma, "xecuti'e H icer, !arware9$all 1opes Gimited Mr.1a:ee'=ewlani, Sr. &nalyst, IC1& Management Consulting Ser'ices Gimited +IMaCS, Mr.-awan*ansal, -roprietor, 8ishal !arments Mr.JaspreetSingh, !eneral Secretary, &I!M$& Mr.&'nishMalhotra, &ssociate Consultant, $a%ir &d'isors -ri'ate Gimited Mr.=1a:u, 1egional H icer, The Cotton Textiles "xport -romotion Council Mr.1 =/agpal, -CI Mr./ = !uin, 0y. 0irector, Carpet "xport -romotion Council Mr.Su(odh =r.!upta, -u(licity H icer, Carpet "xport -romotion Council Mr.Chetan*i:esure, 0irector, FICCI Ms./isha !oel, Sr. &sstt. 0irector, FICCI