The textile industry of India is famous 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 to the 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 growth 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 aim at strengthening the domestic market creating new opportunities for new businesses 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 as well as simple 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 someone in many 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 parts of the country. The cotton fibers and textiles witness more effort and time consumption compared towards production of the synthetic and artificial fibers.
Hence, it is quite 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. It is then easy kids and existing businesses decide to buy and sell synthetic and artificial linens.
In view of ICRA, a lower life expectancy rate of 12% is usually recommended by the Dr. Arvind Subramanian Committee is supposed to have an unfavorable impact to your textile business. In this case, especially the cotton value chain, that is a present attracting a zero central excise duty (under optional route).
Unlike the synthetic fiber sector, where the fiber attracts excise duty at the assembly stage (unlike cotton). Hence, there can be an incentive for the 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 about the taxation . The current taxes vary from 4% to 12% based on these aspects.
Further, unorganized players in which given tax exemptions according to the dimensions of their operations dominate the textile sector.
There are unique taxation policies for cotton and man-made fibers: Zero duty for cotton fibers as compared to high excise duty structure of nearly 12.5% on man-made dust.
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 often a consumption . Zero rating on exports under GST will increase exports further without the necessity various subsidy schemes.
Goods movement within the states are going to much easier as many local state taxes that are levied through the borders of states will evade and free movement of Goods and service Tax Online Registration in India will get allowed. The cotton and synthetic fiber are also subject to 4%-5% state VAT, which are evaded through the GST.
However, generally if the duty treatments for all cotton and synthetic fibers remains the same, prices of textile items made of cotton fiber could rise a little.
Nevertheless, the equal tax treatment policy will offer you a rise to man-made fiber production and its exports also. The industry has since a protracted 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 that while artificial and synthetic fibers account for around 70% of the earth’s total fiber consumption, they manufacture up intended for 30% of India’s insist on good.
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