The textile industry of India is known for its craftsmanship and different 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 for its finely created textiles in high demand all over turmoil. 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 changes in taxation under the actual GST regime. The implication of GST will affect which is actually a and its boost 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 target strengthening the domestic market creating new opportunities for small businesses in the textile industry. The advent of GST in the textile sector will encourage more organized structure in implementation in the textile industry.
The GST brings forth transparent easy 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 impacts revenue.
Cotton based textiles are an important part of the nation’s economy and duty relaxation plays a vital role in business expansion in different parts of the country. The cotton fibers and textiles witness more effort and time consumption compared on the production of the synthetic and artificial fibers.
Hence, it is possible the government will introduce special taxation relief and incentives for the cotton textile industry. Affected 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 for new and existing businesses decide to buy and sell synthetic and artificial textiles.
In look at ICRA, a decreased rate of 12% is suggested by the Dr. Arvind Subramanian Committee is supposed to have a negative impact on the textile group. In this case, especially the cotton value chain, that is present attracting a zero central excise duty (under optional route).
Unlike the synthetic fiber sector, if the fiber attracts excise duty at the fabrication stage (unlike cotton). Hence, there can be an incentive for your downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly put into nine categories when we talk by the taxation manner. The current taxes vary from 4% to 12% based on these descriptions.
Further, unorganized players in which given tax exemptions judging by the size of their operations dominate the textile sector.
There are different taxation policies for cotton and man-made fibers: Zero duty for cotton fibers as when compared with high excise duty structure of nearly 12.5% on man-made materials.
With the implementation from the GST, first and foremost . uniform taxation policies which will cause an obstruction as the input taxes will be eliminated since GST is a consumption tax. Zero rating on exports under GST will increase exports further without the various subsidy schemes.
Goods movement within the states can much easier as many local state taxes that levied on the borders of states will evade and free movement of Goods and Services Tax Website will get allowed. The cotton and synthetic fiber are also subject to 4%-5% state VAT, that is evaded coming from the GST.
However, generally if the duty treatments for all cotton and synthetic fibers remains to be the same, prices of textile items made of cotton fiber could rise a little bit.
Nevertheless, the equal tax treatment policy will offer rise to man-made fiber production will be exports also. The industry has since a protracted time, been complaining that 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 explain around 70% of the earth’s total fiber consumption, making up intended for 30% of India’s demand.
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