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The Southern India Mills’ Association

Committed to Foster the Growth of the Textile Industry

Gujarat to offer 2.5% SGST refunds in lieu of VAT sops

GANDHINAGAR: Taking a first step towards streamlining fiscal incentives under Goods and Services Tax(GST), Gujaratgovernment has decided to reimburse 2.5% of State Goods and Services Tax (SGST) in lieu of sops offered to industries in the previous Value Added Tax (VAT) regime. To begin with, the SGST reimbursement incentivewill be made available to the textile industry, and other sectors will be extended these benefits in a phased manner.
The state government is in final stages of amending various state policies, including the industrial policy, to replace VAT incentives with sops under GST. The government will first amend textile policy to offer SGST sops to the textile sector. “After a series of consultations with various industrial stakeholders, the state government has decided to reimburse 2.5% SGST as fiscal incentive under GST. Under VAT regime, the state government used to offer fiscal incentives such as VAT refund,” said a key source privy to the development.
The state government is gearing up to roll out SGST incentives with textile industry held at top priority as the sector employs a large number of people. “The SGST incentives will be extended to other industrial sectors later on in a phased manner as the state government is currently evaluating the possible financial burden on the exchequer on account of these sops,” the source added.
Although the industries want higher percentages of SGST to be reimbursed, the state government wants to begin with a rate of 2.5%.
Gujarat government is under pressure from the industries to offer fiscal sops under GST regime as fiscal incentives under VAT ceased to exist after GST implementation. With the government yet to finalise any policy decisions with regard to incentives under GST, industries, both large and small, are facing troubles.
“Industries and traders are already facing a lot of challenges as the state government has stopped all financial incentives under VAT for almost a year now. To boost the industries and trade sector the government needs to give minimum 5% reimbursement against the SGST paid,” said Jaimin Vasa, newly elected president of the Gujarat Chamber of Commerce & Industries(GCCI).
“Since the industries have stopped getting VAT refunds or reimbursements since GST came into force in July 2017, the industries also demanded compensation in form of arrears. However, the government will take a call on it shortly. As far as other schemes for micro, small and medium enterprises (MSMEs), large and mega industrial projects as well as other sectoral policies are concerned, the state government will take a separate decision,” said a source close to the development.