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 due to the 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 phony.

The textile industry in India has witnessed several alterations in taxation under fresh 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 good things about the industry players in the domestic market that are designed for strengthening the domestic market creating new opportunities for online companies in the textile industry. The creation of GST in the textile sector will encourage more organized structure in implementation in the textile industry.

The GST brings forth transparent and straightforward taxation process that is 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 country’s exports in textiles leading to the loss of 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 parts of the country. The cotton fibers and textiles witness more effort and time consumption compared to your production of the synthetic and artificial fibers.

Hence, it is quite possible the government will introduce special taxation relief and incentives for the cotton textile industry. Whole 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 linens.

In take a look at ICRA, a lower rate of 12% is recommended by the Dr. Arvind Subramanian Committee is likely to have a damaging impact from the textile category. 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 fabrication stage (unlike cotton). Hence, there a good incentive for that downstream players in the synthetic sector to avail the Input Credit Tax (ITC).

The textile industry is broadly split into nine categories when we talk about the taxation routine. The current taxes vary from 4% to 12% based on these categories.

Further, unorganized players are usually given tax exemptions by the dimensions of their operations dominate the textile segment.

There are different taxation policies for cotton and man-made fibers: Zero duty for cotton fibers as whenever compared with high excise duty structure of nearly 12.5% on man-made products.

With the implementation of the GST, there will be uniform taxation policies this also cause a blockage as the input taxes will be eliminated since GST is a consumption taxes. Zero rating on exports under GST Online Registration in India will increase exports further without the necessity various subsidy schemes.

Goods movement within the states will be much easier as many local state taxes which can be 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 with GST.

However, in case the duty remedy for all cotton and synthetic fibers remains to be the same, prices of textile items made of cotton fiber could rise a bit.

Nevertheless, the equal tax treatment policy will provide rise to man-made fiber production this exports too. 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 is really because while artificial and synthetic fibers explain around 70% of earth’s total fiber consumption, making up for just 30% of India’s demand.

Get your business an edge over other in GST Registration and GST Return Filing from experienced specialist at reasonable cost.