Despite demands from traders and states, the government is sticking to its decision to implement uniform goods and services tax (GST) rate at 12% on manmade fibre (MMF), MMF yarn, MMF fabrics and apparel from January 1, 2022. In its year end statement on Monday, the textiles ministry said that this has addressed the inverted tax structure in the MMF textile value chain and will help the MMF segment grow and emerge as a big job provider in the country.

“The government has notified uniform goods and services tax rate at 12% on MMF, MMF yarn, MMF fabrics and apparel that has addressed the inverted tax structure in the MMF textile value chain. The changed rates will come into effect from January 1, 2022,” the ministry said.

Industry has opposed the rise in tax from 5%, citing higher compliance cost especially for the unorganised sector and MSMEs besides making poor man’s clothing expensive.

Telangana and West Bengal have urged Prime Minister Narendra Modi to intervene in the matter, citing job losses and closure of units.

Former West Bengal finance minister and currently advisor to the state’s Chief Minister, Amit Mitra has said that by raising GST to 12% from 5%, 15 million jobs will be lost and 1 lakh units will close.

The Confederation of All India Traders on Monday said that the high tax will not only add to the financial burden on end users but also affect small businesses and encourage tax evasion, among other malpractices.

The traders’ body has sought the implementation of tax rate hike to be deferred and the government to constitute a taskforce to arrive at a consensus.

“GST collection across the country is increasing every month and as such any increase in tax rates without consulting the stakeholders will run contrary to the ease of doing business,” CAIT said.

The domestic textile and apparel production is approximately $140 billion including $40 billion of textiles and apparel export, the ministry said.

The textile and apparel industry contributed 2% in the overall GDP of India in 2019 and 11% to total manufacturing in GVA.

As per the ministry, this industry alone has the capacity to generate around 70 jobs in garmenting and an average of 30 jobs overall for every Rs 1 crore ($132,426) invested as compared to 12 jobs created on an average in other industries.

“With direct and indirect employment of close to 105 million people, this industry is the second largest employment generator in the country, next only to agriculture. More significantly, women constitute 70% of the workforce in garment manufacturing and about 73% in handloom,” it said.

On the seven Pradhan Mantri Mega Integrated Textile Region and Apparel (MITRA) Parks that have been approved with a total outlay of Rs 4,445 crore in a period of five years, it said that the parks will be located at sites which have inherent strength for textile Industry to flourish. The parks will offer the opportunity to create an Integrated Textiles Value Chain- from spinning, weaving, processing/dyeing and printing to garment manufacturing at one location. It is intended to generate around one lakh direct and two lakh employment per park.