MSME ministry asks Fin Min to exempt Khadi from GST

The Dollar Business Bureau 

Ministry of Micro, Small & Medium Enterprises (MSME) has asked the Finance Ministry for considering to exempt Khadi sector from Goods and Services Tax (GST) or ensure a smooth flow of claiming input tax credit for the Khadi Institutions. 

Currently, Khadi yarn is exempted, whereas other Khadi products produced in the sector attract a GST of 5%. 

“Ministry of MSME has approached Ministry of Finance to consider the sector for exemption from GST or to ensure a seamless flow of input tax credit in order for Khadi Institutions to claim input tax credit,” Minister of State for MSME Giriraj Singh said in a written response in Rajya Sabha. 

The entire sector of Khadi and Village Industries has enjoyed the tax exemption benefits even before the independence. 

“With exemption cover to the small scale industries (SSI) sector being sharply declined from the present Rs.150 lakh to Rs.20 lakh, this cover has been removed, which was enjoyed by several Khadi Institutions,” Singh said. 

It is now mandatory for Khadi Institutions to get registration under the GST and also these institutions have to pay GST on several Khadi products, levied at 5%,” the Minister said. 

Singh also informed that the tax rates on products from the Khadi and Village Industries were in the range of zero to 14.30% before the implementation of GST whereas post-GST roll out, the tax rates on same products ranges from 12-28%.