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FIEO demands 5 per cent GST rate for job works in garment sector

 Dr A. Sakthivel, Southern Regional Chairman, Federation of Indian Export Organisations (FIEO), has, in a communication to the Union Finance Minister, made a strong case for a 5 per cent GST rate for job works in the garment sector. He made a detailed elaboration of the reasons in his letter.

in his detailed letter to the finance minister last week released to the press Dr Sakthivel said the industry takes this opportunity to compliment you for GST rate of 5 per cent for certain services, as approved by the GST Council in its meeting held on June 11.

The services by way of job work in relation to textile yarns [other than man-made fibre (filament)] as textile fabrics have been brought to GST rate of 5 per cent with full ITC as against 18 per cent announced earlier.

There are a number of activities which are undertaken by the job workers in garment making which are left out. Some of the important services are as follows:  Cutting/Garmenting, Embroidery, Finishing, Washing/Pressing, Packing, Fabric processing like bleaching, dyeing, printing, knitting

The job work in cotton, blend, MMF should be included under 5 per cent GST uniformly for yarn, fabric, garments and made-ups, whether woven or knitted, irrespective of fibre base.

The manufacturing model followed by the garment sector involves outsourcing the job of various stages of production to job workers specialising in different processes. Due to the strict norm fixed by our global buyers having rigid and strict compliances standards, the job workers are required to perform such jobs as per world standards.

In principle, the arrangement followed in the working pattern is illustrated hereunder:

The job workers are engaged by the garment exporters for undertaking certain specialised jobs in the nature of cutting, stitching, embroidery, thread cutting, washing, pressing, buttoning, packing, tagging, etc. and not for the supply of labour.

The main raw material in relation to which the jobs are to be undertaken is supplied by garment exporters to the job workers.

The raw material issued to the job workers under the cover of internal challan.

On completion of the assigned job, the job workers return the processed goods under the cover of a delivery challans.

 The job workers raise the invoice on garment exporters on the basis of quantum of the work done.

It is submitted that the activities of job workers undertaken by them constitute manufacturing activities.

Carrying out any intermediate production process on job work basis in relation to textile processing is a common phenomenon.

Therefore, it is suggested that the activities, as above (i.e. cutting/garmenting, embroidery finishing, washing/pressing, packing, fabric processing like bleaching, dyeing, printing, knitting) be inserted in Serial No.13A by way of job work in relation to the description of services in the ‘Schedule of GST Rates for Services’ as approved by the GST Council at 5 per cent with full ITC, including garments and made-ups, which are left out, whether woven or knitted, irrespective of fibre base.

The labour-intensive sector of apparel manufacturing heavily depends on job work. Therefore, the recommendations of the Council be accepted.

 


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