Raymond CFO: Will take a demand hit as GST rake has to be passed on

11 December 2021, Mumbai:

Amit Agarwal, Group Chief Finance Officer at India's top textiles maker Raymond said the government's decision to increase the goods and services tax rate (GST) on textiles and apparel to 12 percent from previously 5 percent could impact demand, adding the company has plans to pass on the full increase.

The textile industry does not have the leeway to absorb 4 percent additional costs, says Amit Agarwal, CFO Raymond. The government on November 18 notified an increase in the GST rate on textiles and apparel to correct inverted duty structures; the rate hike is effective from January 1, 2022.

Inverted duty structures are simply those where there is a higher tax on the input than the tax on finished goods or the output. This results in excess accumulation of credit which may go unutilised.

The sweet spot for most of the rails is around 8-85 percent With the 5 pe cent GST so far, there was a lot of credit) accumulation considering the inverted duty structure because in terms of textile processing there were many services bought that used to carry 15 percent GST but the output tax was only 5 percent So, that was not the most efficient structure.

But taking a to 12 percent, the textile industry does not have so much leeway that it can absorb this 4 percent additional costs Raymond Group CFO Amit Agarwal told ETCFO.

ET (The news article has not been edited by DFU Publications staff)