The Gujarat High Court recently quashed a Central notification relating to availment of input tax credit under the GST for power looms manufacturing fabrics with man-made fiber, which is likely to come as a big relief to textile units in the State as well. The input tax credit is a mechanism through which a manufacturer claims the credit on raw materials, which will enable them to offset their GST.
However, power looms making fabrics with man-made fiber were impacted by an inverted duty structure, as their raw materials attracted 18% GST, while the final product (fabric) attracted 5% GST, as the input tax credit kept on accumulating.