The textile industry of India is famous 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 ready 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 man made.
The textile industry in India has witnessed several changes in taxation under brand new GST regime. The implication of GST will affect the marketplace and its increase in future. The textile production process contains synthetic & artificial fibers and naturally created fibers.
The GST regime offers many benefits to 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 involving 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 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 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 to the 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. Affected 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 brand and existing businesses pay for and sell synthetic and artificial fabrics.
In look at ICRA, a lesser rate of 12% is mandatory by the Dr. Arvind Subramanian Committee is preparing to have damaging impact from the textile sector. 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 the downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly split up into nine categories when we talk by the taxation policy. The current taxes vary from 4% to 12% based on these descriptions.
Further, unorganized players that given tax exemptions based on the dimensions of their operations dominate the textile community.
There will vary 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, your site uniform taxation policies that may cause a blockage as the input taxes will be eliminated since GST can be a consumption tax. Zero rating on exports under GST will increase exports further without the need for various subsidy schemes.
Goods movement within the states are going to much easier as many local state taxes which can be levied on 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, that will be evaded by the GST.
However, when the duty remedy for all cotton and synthetic fibers remains to be the same, prices of textile items made from cotton fiber could rise a little.
Nevertheless, the equal tax treatment policy will give a rise to man-made fiber production specific exports too. The industry has since a hard 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 happens because while artificial and synthetic fibers account for around 70% of earth’s total fiber consumption, create up for just 30% of India’s demand.
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