The textiles industry has complained that the absence of refund on input tax credit on the domestic sale of synthetic fabrics has blocked its working capital, while an inverted duty structure makes the rate on inputs higher than that on the output.
Sanjay Jain, chairman, Confederation of Indian Textile Industry (CITI) said that synthetic fibre is taxed at 18%, yarn at 12% and final output at 5%, creating a tax structure where rate on inputs is higher than that on output. This inverted structure has made it easier to import synthetic textiles, (rather) than manufacture them domestically. Refund of inverted duty is allowed, but it leads to working capital blockage for months. Goods and services tax (GST) on capital goods is not refunded.
Also, rules do not allow refund or adjustment of goods and services tax on services from output GST obligations, which has led to losses for small and medium enterprises using job working services and having an inverted duty structure.
The industry has sought refund for unused input tax credit that lapsed on July 31 last year and extension of the refund to those selling in the domestic market to resolve this issue.
