The textile industry of India is known 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 ready for its finely created textiles in high demand all over exciting world of. Despite such high demand, the textile industry in India was unable meet up with 100% demand of Indian textiles both organic and man made.
The textile industry in India has witnessed several changes in taxation under the new GST regime. The implication of GST will affect the business and its development 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 aim at strengthening the domestic market creating new opportunities for small businesses in the textile industry. The connected with 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 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 long 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 the loss of revenue.
Cotton based textiles are an important part of the country’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 production of the synthetic and artificial fibers.
Hence, it is achievable 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. It is then easy for first time and existing businesses shop for and sell synthetic and artificial textiles.
In look at ICRA, a decreased rate of 12% is usually recommended by the Dr. Arvind Subramanian Committee is inclined to have damaging 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, if the fiber attracts excise duty at the development stage (unlike cotton). Hence, there is 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 with regards to the taxation policy. The current taxes vary from 4% to 12% based on these categorizations.
Further, unorganized players that given tax exemptions on the basis of the dimensions 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 to be able to high excise duty structure of nearly 12.5% on man-made fabrics.
With the implementation of the GST, blogs uniform taxation policies can cause a blockage as the input taxes will be eliminated since GST Application Online in India is really a consumption taxation. Zero rating on exports under GST will increase exports further without the requirement for various subsidy schemes.
Goods movement within the states can much easier as many local state taxes that are levied for your 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 with GST.
However, should the duty dealing with all cotton and synthetic fibers remains the same, prices of textile items made from cotton fiber could rise a bit.
Nevertheless, the equal tax treatment policy will provide a rise to man-made fiber production will be exports also. 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 happens because while artificial and synthetic fibers explain around 70% of the total fiber consumption, they make up for less than 30% of India’s demand.
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