With input tax credit (ITC) refunds for most industries pending for some six months now, textile processing units have been hit hard, with most battling working capital crunch. Estimates by textile processing units indicate that ITC refunds to the tune of around Rs 100 crore are pending for units across Gujarat – mainly in the clusters in Ahmedabad, Surat, Jetpur and Rajkot.
“Not a single ITC refund has been processed yet. This has led to major working capital crunch, especially for small and medium-scale units. With increase in raw material prices, our input costs have risen and it is difficult to sustain business operations,” said Naresh Sharma, vice president, Ahmedabad Textile Processing Association.
Industry experts claim that prices of raw materials widely used in textile processing, including colour and chemicals has gone up. “The prices of caustic soda or caustic lye has increased by 40%. Similarly, the prices of colouring chemicals have also gone up in domestic and international market. This is bound to hit textile processing units with input costs going up,” said Shailesh Patwari, president, Gujarat Chamber of Commerce and Industries (GCCI). Struggling under severe working capital crunch, many units are either seeking loans or cutting down heavily on profit margins. “Currently, our production costs have gone up. Against this, ITC refunds haven’t been processed, causing major capital crunch. This is not just denting the profits but is also impacting production and in turn, hitting business,” said Nitin Thakker, owner of a textile processing unit in Ahmedabad.
Industry players claim the amount pending in the form of ITC is higher than their actual GST rates.
Explaining this, Arvind Hirpara, a partner in a city-based textile processing unit, said, “We’re paying an average of 11% tax into input processes including lignite, power, chemicals and other miscellaneous processes. However, the finished product is sold on 5% GST. Therefore, our input cost is higher than what we get on the sale of products and with no ITC, it is difficult to run business.”