The textile industry of India is known 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 because of its finely created textiles in high demand all over the earth. Despite such high demand, the textile industry in India was unable meet up with 100% demand of Indian textiles both organic and manmade.
The textile industry in India has witnessed several adjustments to taxation under fresh GST regime. The implication of GST Application Online in India will affect the sector and its boost future. The textile production process that features synthetic & artificial fibers and naturally created fibers.
The GST regime offers many advantages to the industry players in the domestic market that are designed for strengthening the domestic market creating new opportunities for new business organisations in the textile industry. The associated with GST in the textile sector will encourage more organized structure in implementation in the textile industry.
The GST brings forth transparent 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 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 the loss of 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 places. The cotton fibers and textiles witness more effort and time consumption compared to your 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 for brand and existing businesses decide to buy and sell synthetic and artificial linens.
In take a look at ICRA, a lower life expectancy rate of 12% is suggested by the Dr. Arvind Subramanian Committee is supposed to have damaging impact close to textile category. 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, where the fiber attracts excise duty at the stage (unlike cotton). Hence, there is an incentive for your downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly divided into nine categories when we talk by the taxation policy. The current taxes vary from 4% to 12% based on these categories.
Further, unorganized players in which given tax exemptions by the dimensions of their operations dominate the textile community.
There have different 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 fibers.
With the implementation from the GST, you will hear uniform taxation policies that may cause an obstruction as the input taxes will be eliminated since GST can be a consumption taxes. Zero rating on exports under GST will increase exports further without the requirement for various subsidy schemes.
Goods movement within the states can much easier as many local state taxes that are 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 is evaded through the GST.
However, if the duty treatment of all cotton and synthetic fibers continues to be the same, prices of textile items made of cotton fiber could rise a tad bit.
Nevertheless, the equal tax treatment policy will offer rise to man-made fiber production in addition to its exports also. The industry has since a long 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 supplier for around 70% of the earth’s total fiber consumption, they can make up for 30% of India’s usage.
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