PEAC President A Sakthivel said the decision would be a big breath for the industry.
“The revision will reduce the tax burden on synthetic fiber fabrics and clothing (MMF),” he said.
He said the reverse duty structure posed a problem for the garment industry and the council had made recommendations to the government for the elimination of this anomaly which resulted in the accumulation of input tax credits blocking the crucial working capital for businesses.
Inputs in the MMF fabrics segment (fibers and yarns) are subject to a GST rate of 18% and 12%, while the GST rate on MMF fabric is 5% and that of finished garments is 5% and 12%. , he said.
This creates a tax structure in which the rate on inputs is higher than the rate on products, which increases the effective tax rate on MMF fabrics and clothing and violates the principle of fiber neutrality, Sakthivel said.
He also said that the GST Council’s decision to extend the validity of the GST exemption on the transport of goods by sea and air from India to outside India until September 30 2022, will partly help mitigate the impact of the current exorbitant freight costs.