Impact of GST on Textile Industries

The textile industry of India is renowned for its craftsmanship and different 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 turmoil. Despite such high demand, the textile industry in India was unable fulfill 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 which is actually a and its increase in future. The textile production process that features synthetic & artificial fibers and naturally created fibers.

The GST regime offers many good things about the industry players in the domestic market that focus on 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 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 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 parts of the country. The cotton fibers and textiles witness more effort and time consumption compared to 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. 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 for first time and existing businesses decide to buy and sell synthetic and artificial textiles.

In take a look at ICRA, a lower rate of 12% is recommended by the Dr. Arvind Subramanian Committee is preparing to have a harmful impact close to textile sector. In this case, especially the cotton value chain, that is situated 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 is definitely an incentive for that downstream players in the synthetic sector to avail the Input Credit Tax (ITC).

The textile industry is broadly broken into nine categories when we talk with regard to the taxation manner. The current taxes vary from 4% to 12% based on these categories.

Further, unorganized players in which given tax exemptions judging by the size of their operations dominate the textile section.

There are wide and varied 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 with the GST, there will be uniform taxation policies which will cause a blockage as the input taxes will be eliminated since GST is really 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 which usually levied through the 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, which is evaded through the GST.

However, generally if the duty dealing with all cotton and synthetic fibers continues to be same, prices of textile items made from cotton fiber could rise a little bit.

Nevertheless, the equal tax treatment policy will give a rise to man-made fiber production specific exports too. The industry has since a lengthy 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 contribute around 70% of the world’s total fiber consumption, they can make up intended for 30% of India’s requirement.

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