The textile industry of India is renowned for its craftsmanship and different 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 due to the finely created textiles in high demand all over turmoil. Despite such high demand, the textile industry in India was unable to meet 100% demand of Indian textiles both organic and fabricated.
The textile industry in India has witnessed several modifications to taxation under the actual GST regime. The implication of GST will affect the industry and its increase in future. The textile production process contains synthetic & artificial fibers and naturally created fibers.
The GST regime offers many advantages 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 creation 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 of which may be 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 some time 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 loosing revenue.
Cotton based textiles are an important part of the country’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 towards the production of the synthetic and artificial fibers.
Hence, it can be performed the government will introduce special taxation relief and incentives for the cotton textile industry. Whole 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 materials.
In view of ICRA, a lower rate of 12% is recommended by the Dr. Arvind Subramanian Committee is travelling to have a negative impact close to textile business. In this case, especially the cotton value chain, that is at present attracting a zero central excise duty (under optional route).
Unlike the synthetic fiber sector, for the fiber attracts excise duty at the development stage (unlike cotton). Hence, there is definitely an incentive for that downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly split into nine categories when we talk on your taxation manner. The current taxes vary from 4% to 12% based on these descriptions.
Further, unorganized players who are given tax exemptions based on the proportions their operations dominate the textile sector.
There are wide and varied 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 products.
With the implementation in the GST, there will be uniform taxation policies that may 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 necessity various subsidy schemes.
Goods movement within the states are going to much easier as many local state taxes which can be levied through 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 Application Online in India.
However, if the duty treatment of all cotton and synthetic fibers remains the same, prices of textile items made of cotton fiber could rise a tad.
Nevertheless, the equal tax treatment policy will give a rise to man-made fiber production this exports also. The industry has since a 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 really because while artificial and synthetic fibers explain around 70% of the earth’s total fiber consumption, they make up for 30% of India’s requirement.
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