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 synthetic.
The textile industry in India has witnessed several alterations in taxation under the actual GST regime. The implication of GST will affect the business and its growth in future. The textile production process that includes synthetic & artificial fibers and naturally created fibers.
The GST regime offers many advantages to the industry players in the domestic market that target strengthening the domestic market creating new opportunities for new business organisations 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 easy taxation process that 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 some time 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 impacts revenue.
Cotton based textiles are an important part of the country’s economy and duty relaxation plays a crucial role in business expansion in different parts of the country. 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 will make it easy for first time and existing businesses pay for and sell synthetic and artificial textiles.
In look at ICRA, a cheaper rate of 12% is usually recommended by the Dr. Arvind Subramanian Committee is likely to have a damaging impact to your textile business. 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, the location where fiber attracts excise duty at the assembly stage (unlike cotton). Hence, there is actually definitely an incentive for your downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly divided into nine categories when we talk about the taxation . The current taxes vary from 4% to 12% based on these descriptions.
Further, unorganized players are usually given tax exemptions according to the size of their operations dominate the textile segment.
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 fibers.
With the implementation in the GST, there will be uniform taxation policies which will 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 various subsidy schemes.
Goods and Services Tax Registration in India Online 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, which are evaded the particular GST.
However, generally if the duty treatment of all cotton and synthetic fibers remains the same, prices of textile items made of cotton fiber could rise a little bit.
Nevertheless, the equal tax treatment policy will provide a rise to man-made fiber production will be exports too. The industry has since a hard 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 supplier for around 70% of the earth’s total fiber consumption, they can make up for 30% of India’s requirement.
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