Sat Sep 06 16:00:16 UTC 2025: Okay, here’s a summary of the article and a rewritten version in news article format:

**Summary:**

MSMEs in Coimbatore’s engineering sector are urging the Indian government to reduce the GST rate for the entire sector to 5%, down from the current 18%. They argue the current system, especially with the recent increase in job work rates, places a significant burden on micro units that cannot fully utilize input tax credits. They also point to the impact of international tariffs and believe a lower GST would boost domestic demand, particularly for castings. Industry associations have submitted memorandums to the Union Finance Minister, highlighting that the 18% rate ties up working capital and that a 5% rate would not significantly reduce government revenue since the principal manufacturer ultimately pays the GST.

**News Article:**

**Coimbatore MSMEs Demand GST Cut to 5% to Revive Engineering Sector**

**COIMBATORE, September 6, 2025** – Micro, Small, and Medium Enterprises (MSMEs) in Coimbatore’s crucial engineering sector are appealing to the Union government for a significant reduction in the Goods and Services Tax (GST), arguing that the current rates are stifling growth and placing undue strain on smaller businesses.

Industry associations, including the Federation of Coimbatore Industrial Associations and the Coimbatore District Small Industries Association (CODISSIA), have submitted formal requests to Union Finance Minister Nirmala Sitharaman, calling for a reduction of the GST rate for the entire engineering sector to 5%, down from the existing 18%.

J. James, coordinator of the Federation of Coimbatore Industrial Associations, stated that the current GST structure, especially the recent increase in job work rates to 18% from 12%, disproportionately impacts micro units. These units, which primarily handle labor charges for larger industries providing raw materials, struggle to utilize input tax credits effectively, resulting in a higher tax burden.

“The micro units cannot take input tax credit as the raw materials are supplied by the larger industries that give the job work,” said James. “Hence, the micro units end up paying 18% duty. This issue can be resolved if the entire sector is brought under 5%.”

Furthermore, industry leaders highlighted the impact of international tariffs, such as the Trump tariffs, which have slowed down orders for castings, a key product manufactured in Coimbatore. They argue that a lower GST rate would stimulate domestic demand and help revive the foundries sector.

CODISSIA’s memorandum further elaborated on the challenges faced by job workers under the ‘residual entry’ category, who now face an 18% tax rate despite being eligible for input tax credits. The associations emphasize that job work represents an intermediary process in the manufacturing cycle, where MSMEs perform tasks like machining and welding on goods provided by principal manufacturers.

The 18% GST rate, they argue, ties up significant working capital for MSME job workers, who often operate with extended working capital cycles. Under the previous Central Excise regime, job works were exempt from duty. The associations believe that lowering the GST rate to 5% would not significantly impact government revenue, as GST is ultimately paid by the principal goods manufacturer.

The MSMEs of Coimbatore are hopeful that the government will consider their plea and implement the GST reduction to provide a much-needed boost to the engineering sector.

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