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The Southern India Mills’ Association

Committed to Foster the Growth of the Textile Industry

SIMA makes pre-budget recommendations to Indian govt

Exemption of 5 per cent goods and services tax (GST) on raw cotton, reduction of 18 per cent GST on manmade fibres (MMF) and recycled polyester staple fibre to 12 per cent and 5 per cent respectively, and levying GST on petroleum products are some of the key pre-budget suggestions offered by the Southern India Mills’ Assocaition (SIMA) to the government.
Cotton may be exempted from GST when purchased directly from the farmers under reverse or forward charge mechanism to reduce blockage of working capital at the time of procurement of inputs. As cotton enters the commercial stream only after raw cotton is ginned, GST may be applied from the ginned stage, SIMA said in a press release.
SIMA feels it is essential to reduce GST on manmade fibres from 18 to 12 per cent as these fibres provide more jobs and fetch higher value addition. All petroleum products should be brought under the GST net to reduce production cost by permitting seamless flow of input tax credit. Though the GST law permits refund of credit accumulated due to the inverted duty structure with regard to goods and services, restriction with regard to fabric increases the cost of the product during its value addition. As fabric and its value added final products are goods consumed by the public, credit may be permitted to be availed or refunded, thereby reducing the negative impact on the product, according to SIMA chairman P Nataraj.
The government should also reduce the rate of corporate tax from 34.6 per cent to 25 per cent in a phased manner, the association said. Cotton yarn should be included under the Merchandise Exports from India Scheme (MEIS) and Interest Equalisation Scheme (IES) benefits to arrest the decline in cotton yarn export and a stimulus package is needed for small and medium enterprises in the spinning sector that have been badly affected by demonetisation and GST implementation, it added.