The textile industry of India is renowned for its craftsmanship and unique 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 globe. 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 changes in taxation under fresh GST regime. The implication of GST will affect the industry and its increase in future. The textile production process which includes synthetic & artificial fibers and naturally created fibers.
The GST regime offers many benefits to the industry players in the domestic market that concentrate on strengthening the domestic market creating new opportunities for online companies 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 as well as simple 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 decline of revenue.
Cotton based textiles are an important part of the nation’s economy and duty relaxation plays a crucial role in business expansion in different areas. The cotton fibers and textiles witness more effort and time consumption compared to your 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. This will make it easy for new and existing businesses to buy and sell synthetic and artificial textiles.
In view of ICRA, a lower life expectancy rate of 12% is recommended by the Dr. Arvind Subramanian Committee is supposed to have damaging impact on the textile business. 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, where the fiber attracts excise duty at the production stage (unlike cotton). Hence, there a good incentive for your 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 descriptions.
Further, unorganized players that given tax exemptions according to the dimensions of their operations dominate the textile part.
There will vary taxation policies for cotton and man-made fibers: Zero duty for cotton fibers as the actual high excise duty structure of nearly 12.5% on man-made products.
With the implementation with the GST, there will be uniform taxation policies that will cause a blockage as the input taxes will be eliminated since GST is a consumption . Zero rating on exports under GST will increase exports further without the need 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, that is evaded by the GST.
However, in case the duty treatments for 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 provide rise to man-made fiber production this 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 account for around 70% of by far the total fiber consumption, they can make up for 30% of India’s insist on good.
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