CMAI Welcomes GST Reform, Seeks Clarity on Textile Slab Rates

At the outset, CMAI congratulates and thanks Hon. Prime Minister, Sh. Narendra Modiji, for his decision to amend the GST rules with the twin objectives of making products of mass consumption cheaper for consumers, and to simplify the complex multi-tiered GST slabs and reduce it to just three slabs, they being 5%, 18%, and 28%. These changes will be a game changer in the economic progress of the country, and go a long way in improving ‘ease of doing business’.

However, CMAI cautions that it has not been clarified whether the entire spectrum of Textiles, particularly Garments, will be brought under the 5% slab, or only Garments within a certain price range.

CMAI has been continuously advocating a single and uniform rate of GST for all sectors of the Textile Industry, at the lowest slab which is 5%, with the underlying logic that Textiles is always considered an item of mass consumption, and essential commodity, and universally taxed at the lowest slab of taxation.

However, some disturbing Media reports indicate that the Government may be considering the products priced above Rs.2500 to be taxed at 18%.

Santosh Katariya, President, Clothing Manufacturers Association of India (CMAI), stated that “Keeping textiles products along with products like electronics, mobile phones etc. under the same GST slab would not be consistent from an overall economic rationale and consumer perspective”. He further added that the industry, which previously notorious for its strong participation in the ‘Grey’ or ‘informal’ sector, was brought into the ‘formal’ sector largely due to the reasonable rate of GST (5%). Even the rate of 12% was, albeit with hesitancy, accepted by the industry for a portion of its products, as the difference between the two segments was acceptable though not ideal.

Katariya further expressed his concern stating that “by levying 18% GST on products priced above a certain price point, will only encourage going back to the earlier era of informal transactions. Any such arbitrarily determined price point will only encourage manufacturers and traders to avoid raising Invoices, or under-valuing them. Manufacturers will also tend to reduce their quality standards in order to come under the maximum cut off price point,” he cautioned.

Ankur Gadia, Vice President, CMAI, pointed out that various product categories such as Woolen Clothing, Wedding Clothes, and Sustainable Clothing were more expensive due to the inherent higher costs of their raw material and manufacturing processes. “Woolen clothes are part of essential consumption in many parts of India, particularly North and North East, and it would be unfair to tax them at a higher rate merely because it is priced at Rs. 3,500 or 5,000.”

Similar is the case of Wedding clothes, he added, “Dressing up one’s daughter for her wedding is the dream of every parent – regardless of their social or financial status. Should this dream be slashed merely because the typical ‘lehenga’ or wedding saree is priced at Rs. 10,000 or 15,000?”

Rahul Mehta, Chief Mentor,CMAI, also called out that “One of the categories which will suffer hugely is our traditional Handloom and Embroidered garments, which are intrinsically more expensive compared to synthetic and machine-made garments due to their very nature. Should we charge a higher tax to our home-grown traditional clothing?”

The current “Tariff Wars” are already threatening to deal a death blow to the Export Sector of Textiles. We need a strong, thriving domestic sector for the industry to survive.

To summarize, CMAI urges the entire Textile Value Chain to be brought under the 5% slab for the following reasons:

1. Textiles of all forms are items of mass consumption

2. A price-led bifurcation of GST slabs will lead to hardships will lead to arbitrary exclusion of critical items such as woolens and celebratory wear

3. Proudly Indian and traditional products will suffer with high GST rates

4. The highest employer after agriculture should not be tampered with

5. High risk of sector reverting to informal sector if levied with high GST

6. Indian garment industry already in crisis with the current tariff wars 

CMAI looks forward to the Government’s understanding and support and urged the GST Council to retain the entire Textile sector under the 5% GST slab.