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    Unified MMF Value Chain 12% GST Effective January 1st in India

    The Government of India has announced a 12% Goods and Services Tax (GST) on Artificial Textiles (MMF), MMF Threads, MMF Fabrics, and Apparel to address the reverse tax structure of the MMF Textile Value Chain. The changed rates will be effective from January 1, 2022.

    So far, GSTs on MMFs, MMF yarns and MMF fabrics have been 18 percent, 12 percent and 5 percent, respectively. Taxing inputs at a higher tax rate than the finished product resulted in credit accumulation and cascading costs. In addition, taxes accumulated at various stages of the MMF value chain, blocking working capital, which is important to the industry.

    The GST Act provides for a refund of unused temporary consumption tax credits (ITCs), but there are other issues that have increased the burden of compliance. The reverse tax system has caused an effective increase in the tax rate of the sector. The Ministry of Textiles said in a press release that global textile trade is heading towards MMFs, but India could not take advantage of this trend as the MMF segment was constrained by money market funds.

    The Government of India has announced a 12% Goods and Services Tax (GST) on Artificial Textiles (MMF), MMF Threads, MMF Fabrics, and Apparel to address the reverse tax structure of the MMF Textile Value Chain. The changed rates will be effective from January 1, 2022. This flat rate could contribute positively to the growth of the sector.

    A uniform percentage of 12% could contribute positively to the growth of the sector by saving a lot of working capital and reducing the compliance burden on industry players. It helps to resolve the ITC residue accumulated by the reversal of the tax system at an early stage.

    In addition, the uniformity of GST rate of work related to dyeing and printing services helps the industry to absorb and recover unused ITC. It provides a better range for monetizing cultivated ITCs, as a significant proportion of MMF products (outputs) are expected to be exported. In addition, since the input tax is refunded, the production (export) with a zero evaluation will be costly and will not increase the competitiveness of the export.

    Uniform rates also support industries that have the majority of opening ITCs by allowing them to be cashed in stages.

    “Differences in garment tax rates cause problems with compliance with the tax system. MMF garments are not easily identifiable and cannot be taxed differently, so they need a uniform tax rate. Since the value added to the segment is very likely, the rise in rates can be absorbed by the value added. It provides clarity to the industry and solves the problems caused by the reverse tax system at once. That would be, “the ministry said in a statement.

    Fiber2Fashion News Desk (KD)

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    Unified MMF Value Chain 12% GST Effective January 1st in India

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    The post Unified MMF Value Chain 12% GST Effective January 1st in India appeared first on Eminetra.

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