The Apparel Export Promotion Council (AEPC) on Saturday said the decision of the GST Council to correct inverted duty structure on textiles from January 1, 2022 will lessen the tax burden on manmade fibre (MMF) fabrics and garments.
The GST Council in its latest meeting on September 17 agreed to correct inverted duty structure on footwear and textiles from January 1, 2022.
AEPC Chairman A Sakthivel said the decision will be a big breather to the industry.
"The revision will lessen the tax burden on manmade fibre (MMF) fabrics and garments," he said.
He said the inverted duty structure has been an issue with the apparel industry and that the council had made recommendations to the government for the elimination of this anomaly that has been resulting in input tax credit accumulation blocking crucial working capital for businesses.
Inputs into the MMF fabric segment (fibre and yarn) attract a GST rate of 18 per cent and 12 per cent whereas the GST rate on the MMF fabric is 5 per cent and that for the finished goods apparel is 5 per cent and 12 per cent, he said.
It creates a tax structure where the rate on inputs is higher than that on the outputs and this increases the effective rate of taxation of MMF fabrics and garments and violates the principle of fibre neutrality, Sakthivel said.
He also said that the GST Council's decision to extend the validity of GST exemption on transport of goods by vessel and air from India to outside India till September 30, 2022, will partially help soften the impact of the current exorbitant freight costs.