The GST Council in its 28th meeting held on July 26, 2018 has recommended to allow refund of unutilised ITC to taxpayers in the Textiles Sector. Accordingly , CBIC has issued Notification No . 20/2018 – Central Tax ( Rate) dated July 26, 2018 to implement the above decision . However, the said Notification has stated that the accumulated credit lying unutilized as on July 31, 2018 will lapse .
Ujwal lahoti , Chairman of The Cotton Textiles Export Promotion Council said “This will lead to serious problems for the textiles sector as the costs will go up on the available stocks as on July 31, 2018” . Most of the dyes & chemicals and packing materials used by the textiles sector attract 12% and 18% GST .Further , in the case of manmade fibre textiles , fibre and yarn attracts 18% and 12% GST respectively . Whereas , the GST rate on fabrics is only 5% leading to accumulated Input Tax Credit on account of inverted duty structure .
Section 54 of the CGST Act allows “refund of unutilized Input Tax Credit shall be allowed where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies”.