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The Southern India Mills’ Association

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No IGST reimbursements under textile policy: Gujarat govt

Reimbursement of incentives under the Gujarat Textile Policy of 2012 will be limited to sales within the state, and will not cover those made outside, according to the state Industries and Mines Department.
A July 7 General Resolution (GR) of the Department said that units will be eligible to avail of reimbursement only for State Goods and Services Tax (SGST), and it will not include Integrated Goods and Services Tax (IGST), i.e. GST on inter-state sales.
Textile is the first industry for which the incentive has been announced, while amendment of other policies for replacing VAT incentives with SGST is under process, said a senior government official.
So far, eligible textile units were being given Value Added Tax (VAT) incentives. However, following introduction of GST from July 1, last year, the state government had formed a committee to suggest modalities for SGST incentives. After considering its recommendations, the government has decided to extend SGST incentives in the form of reimbursement under the Policy.
“The eligible manufacturing unit will get reimbursement of the aggregate of SGST paid through cash ledger against output liability of SGST on sale of eligible products / intermediates, and eligible SGST ITC (Input Tax Credit) of inputs and input services used in production,” the GR states.
The GR also states that the unit shall not be entitled to reimbursement of IGST on inter-state supply, reimbursement of SGST input tax credit utilized for payment of IGST, and reimbursement of IGST input tax credit utilized for SGST payment.
Unlike VAT, where tax was received by the state where goods were manufactured, under GST, the tax goes to the state where goods or services are consumed. The tax collected is divided equally between the state and Centre.
This means units will get 50% of the tax paid on eligible products as reimbursement. In other words, the GR means the state government will refund to eligible textile units part of the tax that comes into its own coffers.
GST expert Monish Bhalla said that large textile process houses would not get any benefit of the policy because of the provision about SGST paid through cash ledger.
“In Ahmedabad, majority of the textile processors do not pay SGST in cash, as they have surplus Input Tax Credit. When tax is not paid in cash, even eligible units will not get any incentives according to the GR,” Bhalla said.
He added that the ITC reimbursement is only in case of intra-state supply, which again goes agianst the ground reality as majority of the large units are either exporting or supplying pan-India.
Meena Kaviya, board member of Association of Apparel Manufacturers and Exporters of Gujarat, welcomed the incentives, but she too said that sops should also be given for sales outside the state.
“Most of the textile sector’s sales are outside Gujarat. Orders from organised retailers are from other states,” she added.
Textile products were put in the tax bracket of 12 and 18% originally, but majority of the items were moved to GST rate of 5% after several protests.
Textile products were put in the tax bracket of 12 per cent and 18 per cent originally, but majority of the items were moved to GST rate of 5 per cent after several protests