12% GST on MMF textiles to reduce the compliance burden

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The government is declaring that the uniform GST rate at 12% on MMF, MMF fabrics, yarn, and apparel will decrease the compliance weight of the industry and aid the resolution of input tax credit residues that amassed due to the inverted tax structure earlier.

The GST on MMF, MMF Yarn, and MMF Fabrics were 18%, 12%, and 5% individually. The revised rates will evolve into effect from January 1, 2022.

For a built-up of credits and cascading costs then, the taxation of added at higher rates than finished products produced.

The 12% of the uniform rate for the complete value chain of the MMF textiles sector will be conserved and availing a lot of working capital. 

It will diminish the compliance weight of the industry players. That was a welcoming step by the government with no inversion.

 It would help the MMF segment grow and surface as a huge job provider in the country also on the statement, the textiles ministry said,  appending that the uniform on job work related to printing and dyeing services will avail the industry to recover and absorb unutilized ITC.

It additionally directed to an accumulation of taxes at various frames of the MMF on blockage and the value chain of significant working capital for the industry.

The statement said a significant portion of MMF products yield was expected to be exported, which will lend a more immeasurable scope for encashing the utilized ITC.

Also, since input tax will become reimbursed on output (export) which was to be zero-rated, it would not supplement to cost and initiate exports competitive.

Also, the uniform will benefit the industry that has a massive portion of hoard opening ITC by empowering them to encash the same progressively.

Noting that differential rates for the garments create problems in compliance with tax management, the MMF garments cannot be distinguished easily and taxed differently.

So there is a necessity for a uniform rate as it would make it simple, and so its high potential of value addition in the garment segment would absorb the increase in the rate in value addition.

The ministry said that though there is a regulation in GST law to claim the unutilized ITC as a refund, there were distinct complications and resulted from a more enhanced compliance burden. 

The inverted tax structure influenced an effective increase in the rate of the taxation sector.

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