In Tamil Nadu, particularly in Erode and nearby regions, more than 100 power loom weavers, have claimed for the payment of GST refunds for the tax they paid over approximately 13 months in 2017-2018.
B. Kandavel, the organizing secretary of the Federation of Tamil Nadu Powerlooms Associations, recently informed that in Erode alone, 120 weavers will receive a refund of ₹160 crores, and they possess all the necessary documentation. The man-made fiber sector has been cornered due to multiple GST tax slab rates.
When GST came into existence on July 1, 2017, an 18% duty was applicable on man-made fibre (MMF) and MMF yarn, while MMF fabric was subjected to a 5% duty. However, in November of the same year, the duty on yarn was decreased to 12%.
The weavers paid the GST with the expectation of receiving a refund for the duty paid, following the inverted duty structure. In 2017-2018, GST amounting to ₹50 lakh was paid by weaver C. Jaganathan. However, in January 2019, they were informed that the input tax credit for the GST paid would only be available from August 1, 2018.
To obtain the refund from August 2018, the weavers were required to nullify the input tax account for the period between July 2017 and July 31, 2018. Unfortunately, many weavers did not make the necessary changes to their accounts, hoping for relief. Consequently, they were imposed with an 18% penalty.
Important: GST Impact on Textile Industry in India
Due to this issue, several weavers were compelled to suspend their operations at that time, as stated by Mr. Kandavel.
The weaving sector has been experiencing a slowdown in orders for nearly a year now, and many units are in dire need of financial help. If the government GST refunds the tax paid during the 13 months of 2017-2018, it would provide relief to the weavers.
According to Mr Kandavel, the government might have to disburse ₹1,000 crores as refunds to weavers in the MMF industry across the country.
