Several bigwigs in India’s textile industry have suggested that the government must levy GST on ex-factory price and not the maximum retail price (MRP), as proposed. They maintained that if GST is levied on the MRP, then it will badly affect the entire industry.
In this regard, Shanti L Shah, Chairman and Managing Director of Hiralal Gulabchand Pvt Ltd, a city-based garments manufacturer, said “The MRP is just an indicative price, which cannot be determined for any tax collection. Levying GST on MRP of garments would have multiple ill effects on the entire textile sector. Not only will the front-line textile sector get affected, the entire value chains of the textiles industry would be badly hit.”
The textile industry offers heavy discounts on MRP of branded garments in their organised retail formats to attract business. If the tax is levied on the retail price, then there will not be enough room for retailers to offer such discounts, especially during the lean season, when even branded garments are available at “affordable” prices, which otherwise remains unaffordable for the average middle class.
Again, considering the expenses incurred through branding, transportation and other aspects, it is advisable to have GST levied on ex-factory price, which is the actual manufacturing cost or ex-factory price that can be easily computed on the basis of the current tax system of Central Sales Tax (CST).
Their second demand was for fixing of the Revenue Neutral Rate (RNR), a long-standing issue, in which the industry wants the government to put this labour-intensive industry in the lowest slab of GST. According to trade sources, 12.5 per cent of the GST would be a logical level, without any ill effects on the industry.
However, speaking at the 62nd Garments Fair, Textile Commissioner Dr Kavita Gupta said, “The government has not taken any view on the demand of the industry. But, we are committed to supporting the textiles industry to the maximum possible extent. The industry, meanwhile, should start preparations for the GST.”
