The Southern India Mills’ Association (SIMA) is hopeful of the Union Government reducing the hank yarn obligation for textile mills soon as demand for the yarn in hank form has reduced after implementation of the Goods and Services Tax.
The Confederation of Indian Textile Industry (CITI) and SIMA submitted a memorandum to the Union Textile Minister Smriti Zubin Irani last month in this regard.
The associations pointed out that under GST, hank and cone yarn attract uniform 5 % duty. Earlier, hank yarn attracted 0 % duty. Further, handlooms can take input credit of the duty paid on yarn. So, there is no incentive to use hank yarn. The Government can give the subsidy to the National Handloom Development Corporation directly for the hank yarn purchased and supplied to the weaving units.
The number of handlooms in operation in 2002 was 31.37 lakh and in 2017 it is estimated to have reduced to 21.46 lakh. The proportionate obligation is almost 16 %. The obligatory quantity of yarn required is 929.04 million kg in 2002 and 1596.23 million kg in 2017. A study by the National Institute of Public Finance and Policy in 2008 showed that 38 % of hank yarn is diverted to the powerloom sector. So there is no need to continue with 40 % obligation. The associations had appealed to the Ministry to reduce it to 10 %.