Impact of GST on Textile Industries

The textile industry of India is renowned for its craftsmanship and unique designs all over 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 because of its finely created textiles in high demand all over the world. Despite such high demand, the textile industry in India was unable to meet 100% demand of Indian textiles both organic and fabricated.

The textile industry in India has witnessed several adjustments in taxation under the new GST regime. The implication of GST will affect the sector and its increase future. The textile production process discussing synthetic & artificial fibers and naturally created fibers.

The GST regime offers many good things about the industry players in the domestic market that concentrate on strengthening the domestic market creating new opportunities for new businesses in the textile industry. The associated with GST in the textile sector will encourage more organized structure in implementation in the textile industry.

The GST brings forth transparent and 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 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 nation’s exports in textiles leading to loosing revenue.

Cotton based textiles are an important part of the nation’s economy and duty relaxation plays a huge role in business expansion in different places. The cotton fibers and textiles witness more effort and time consumption compared towards 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. The overall consumption of textiles made from synthetic and artificial fibers at the global scale are 70%.

With duties and taxation streamlined and simplified. This makes it easy kids and existing businesses to get and sell synthetic and artificial fabrics.

In view of ICRA, a lesser rate of 12% is usually recommended by the Dr. Arvind Subramanian Committee is preparing to have a harmful 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, for the fiber attracts excise duty at the stage (unlike cotton). Hence, there is definitely 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 with regard to the taxation routine. The current taxes vary from 4% to 12% based on these categories.

Further, unorganized players who are given tax exemptions judging by the sized their operations dominate the textile part.

There have different 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 products.

With the implementation of the GST, you will hear uniform taxation policies can cause a blockage as the input taxes will be eliminated since GST is a consumption taxes. Zero rating on exports under GST will increase exports further without the necessity for various subsidy schemes.

Goods movement within the states will be much easier as many local state taxes that are levied on his or her 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 through the GST.

However, should the duty dealing with all cotton and synthetic fibers continues to be 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 this exports as well. The industry has since a lengthy 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 happens because while artificial and synthetic fibers account for around 70% of the world’s total fiber consumption, they make up for less than 30% of India’s insist on good.

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