Lok Sabha Question No. 432 (UNSTARRED), answered on 2018-02-05
Subject: Incentives to Industries
Ministry: COMMERCE AND INDUSTRY
Asked by: RAVNEET SINGH

## GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPARTMENT OF INDUSTRIAL POLICY & PROMOTION

## LOK SABHA

## UNSTARRED QUESTION NO. 432. TO BE ANSWERED ON MONDAY, THE 5 TH  FEBRUARY,  2018.

## INCENTIVES TO INDUSTRIES

## 432.   SHRI RAVNEET SINGH:

Will the Minister of COMMERCE AND INDUSTRY be pleased to state:

## वाणिज्य एवं उद्योग मंत्री

- (a) whether  there  is  no  clarity  in  Goods  and  Services  Tax  about  the  various incentives etc.  given  by  the  States for  setting  up  of  industries/companies  in their States and if so, the details thereof and the reasons therefor, especially in the textile  sector;
- (b) whether the Government has evaluated the change in benefits available with regards to incentives for manufacturing textiles and if so, the details thereof;
- (c) whether representations have been made by various industries and companies seeking clarification from the GST Council and his Ministry in this regard; and
- (d) if so, the details thereof along with the response of the Government thereon?

## ANSWER

## वाणिज ् य एवं उद्योग मंत्रालय में राज्य्मंत्री ( श्री सी . आर . चौधरी ) THE MINISTER OF STATE IN THE MINISTRY OF COMMERCE & INDUSTRY (SHRI C.R. CHAUDHARY)

- (a) to (d): It was decided in the 2 nd Goods and Services Tax, (GST) Council Meeting held  on  30.09.2016,  that  all  entities  exempted  from  payment  of  Indirect Tax  under  any  existing  tax  incentive  scheme  shall  pay  tax  in  the  GST regime.  The  decision  to  continue  with  any  incentive  given  to  specific industries in existing industrial policies of States or through any schemes of  the  Central  Government  shall  be  with  the  concerned  State  or  Central Government,  respectively.  In  case  the  State  or  Central  Government decides  to  continue  any  existing  exemption/  incentive/  deferral  scheme, then  it  shall  be  administered  by  way  of  a  reimbursement  mechanism through the budgetary route, the modalities for which shall be worked out by the concerned State/ Centre.

The  'Scheme  of  Budgetary  Support  to  the  eligible  units  located  in  the States of Jammu & Kashmir, Uttarakhand, Himachal Pradesh and North Eastern States including  Sikkim  under  Goods  and Services  Tax  regime' has  been  formulated  for  granting  budgetary  support  to  the  extent  of

Central Government's share in the CGST/IGST collected from these units. The Scheme will be applicable for the residual period from 01.07.2017 to 30.06.2027  to those existing industrial units, located in the  above mentioned  States,  which  were  already  receiving  exemptions  under  the erstwhile Excise Duty Act.

Several issues which have arisen in the implementation of GST in Textiles were  taken  up  by  the  Ministry  of  Textiles  with  Ministry  of  Finance/GST Council.  Subsequently  several  of  the  issues  have  been  resolved  by  the GST Council.

Amongst the issues resolved are:

- 1) GST rate on job works for entire textile segment i.e. yarn, fabric garments and made-ups was revised from 18% to 5%;
- 2) GST rates for a few Handicraft items have been reduced;
- 3) GST rate for Corduroy has been reduced from 12% to 5%;
- 4) GST rates for Manmade Filament and yarn has been reduced from 18% to 12%;
- 5) Import  duty  on  MMF  fabric  has  been  enhanced  from  10%  to 20% to protect  domestic market;
- 6) Sari  has  been  included  in  the  classification  of  fabric  with  5% GST.
- 7) GST rates on velvet fabric has been reduced from 12% to 5% and
- 8) GST rates  on  Common  Effluent  Treatment  Plants  services  of effluents has been reduced from 18% to 12%.

Issues remaining unresolved include:

- i. Non-refund of ITC at fabric stage:.
- ii. Machinery used by MSME textile units to be taxed at lower rates: Tax on machinery used by the MSME textile sector prior to GST was 5%. Taxing of machinery at 18% adversely affects the textile sector. Therefore, the Ministry has-been pursuing differential rate of taxation which could be levied at 5% for machineries costing up to Rs. 1 crore; 12% for machineries costing between Rs. 1 crore and Rs. 5 crores; and 18% on machineries costing more than Rs. 5 crores.
- iii. SITP parks to be treated at par with industrial parks for GST:
- iv. Issues related to enhancement of import duty on other lines of fabrics.

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