Impact of GST on Textile Industries
The textile industry of India is known for its craftsmanship and unique designs all around the world. Starting as early as the Indus Valley Civilization India’s textiles are famous for their fine quality and craftsmanship.
In modern-day, India is famous due to the finely created textiles in high demand all over exciting world of. Despite such high demand, the textile industry in India was unable to meet 100% demand of Indian textiles both organic and phony.
The textile industry in India has witnessed several changes in taxation under the GST regime. The implication of GST will affect the marketplace and its increase in future. The textile production process contains synthetic & artificial fibers and naturally created fibers.
The GST regime offers many benefits to the industry players in the domestic market that focus on strengthening the domestic market creating new opportunities for new business organisations in the textile industry. The involving GST in the textile sector will encourage more organized structure in implementation in the textile industry.
The GST brings forth transparent as well as simple taxation process to get fast paced and saves time from filing taxation at multiple levels for goods and services offered by the textile industry. The textile industry has raised concerns for a long while.
These are the concerns for duty disparity that is preventing the domestic textile producers from expanding their operations and scaling up their manufacturing for better revenue via exports. This is consequently hurting the country’s exports in textiles leading to the decline of revenue.
Cotton based textiles are an important part of the country’s economy and duty relaxation plays a vital role in business expansion in different regions. The cotton fibers and textiles witness more effort and time consumption compared on the production of the synthetic and artificial fibers.
Hence, it may happen the government will introduce special taxation relief and incentives for the cotton textile industry. Your engine’s overall consumption of textiles made from synthetic and artificial fibers at the global scale are 70%.
With duties and taxation streamlined and simplified. This will make it easy moms and dads and existing businesses decide to buy and sell synthetic and artificial fabrics.
In view of ICRA, a lesser rate of 12% is suggested by the Dr. Arvind Subramanian Committee is travelling to have a damaging impact on the textile sector. In this case, especially the cotton value chain, that are at present attracting a zero central excise duty (under optional route).
Unlike the synthetic fiber sector, the location where fiber attracts excise duty at the stage (unlike cotton). Hence, there can be an incentive for the downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly split up into nine categories when we talk by the taxation routine. The current taxes vary from 4% to 12% based on these categorizations.
Further, unorganized players that given tax exemptions according to the measurements their operations dominate the textile part.
There will vary taxation policies for cotton and man-made fibers: Zero duty for cotton fibers as the actual high excise duty structure of nearly 12.5% on man-made materials.
With the implementation in the GST, you will hear uniform taxation policies that may cause an obstruction as the input taxes will be eliminated since GST is often a consumption taxes. Zero rating on exports under GST will increase exports further without the need for various subsidy schemes.
Goods and Service Tax Registration in India Online movement within the states tend to be much easier as many local state taxes which usually levied for your borders of states will evade and free movement of goods will get allowed. The cotton and synthetic fiber are also subject to 4%-5% state VAT, that will be evaded coming from the GST.
However, when the duty treatments for all cotton and synthetic fibers remains the same, prices of textile items associated with cotton fiber could rise a tad bit.
Nevertheless, the equal tax treatment policy will offer rise to man-made fiber production will be exports also. The industry has since a time, been complaining how the duty disparity is barring domestic producers from scaling up operations and, eventually ending up hurting India’s export competitiveness in artificial and synthetic textiles.
This is mainly because while artificial and synthetic fibers contribute around 70% of by far the total fiber consumption, create up safeguard 30% of India’s requirement.
Get your business an edge over other in GST Registration and GST Return Filing from experienced specialist at reasonable cost.
