The textile industry of India is renowned for its craftsmanship and unique designs all around the globe. 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 the earth. 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 brand new GST regime. The implication of GST will affect the marketplace 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 focus on strengthening the domestic market creating new opportunities for small businesses 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 and straightforward 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 country’s exports in textiles leading to someone in many revenue.
Cotton based textiles are an important part of the country’s economy and duty relaxation plays an important role in business expansion in different places. The cotton fibers and textiles witness more effort and time consumption compared to your 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 existing 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 decide to buy and sell synthetic and artificial fabrics.
In take a look at 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 situated at present attracting a zero central excise duty (under optional route).
Unlike the synthetic fiber sector, the location where fiber attracts excise duty at the fabrication stage (unlike cotton). Hence, there a good 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 with regard to the taxation routine. The current taxes vary from 4% to 12% based on these categories.
Further, unorganized players that given tax exemptions by the size of their operations dominate the textile segment.
There are different 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 fabrics.
With the implementation from the GST, first and foremost . uniform taxation policies that will 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 requirement for various subsidy schemes.
Goods movement within the states will be much easier as many local state taxes which can be 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 is evaded by the GST.
However, when the duty cure for all cotton and synthetic fibers remains the same, prices of textile items associated with cotton fiber could rise a little bit.
Nevertheless, the equal tax treatment policy will offer you a rise to man-made fiber production in addition to its exports as well. The industry has since a 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 contribute around 70% of by far the total fiber consumption, create up for 30% of India’s requirement.
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