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 for its finely created textiles in high demand all over globe. 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 modifications to taxation under the new GST regime. The implication of GST will affect the sector and its growth in future. The textile production process discussing synthetic & artificial fibers and naturally created fibers.
The GST regime offers many good things about the industry players in the domestic market that concentrate on strengthening the domestic market creating new opportunities for new business organisations 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 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 loosing revenue.
Cotton based textiles are an important part of the nation’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 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. 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 materials.
In view of ICRA, a lower life expectancy rate of 12% is usually recommended by the Dr. Arvind Subramanian Committee is inclined to have an unfavorable impact from the textile sector. 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, if the fiber attracts excise duty at the development stage (unlike cotton). Hence, there a good incentive for that 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 with regard to the taxation policy. The current taxes vary from 4% to 12% based on these sorts.
Further, unorganized players that given tax exemptions according to the size of their operations dominate the textile community.
There are wide and varied 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 fibers.
With the implementation of the GST Website India online, there will be uniform taxation policies this also cause an obstruction as the input taxes will be eliminated since GST is a consumption tax. Zero rating on exports under GST will increase exports further without the necessity for various subsidy schemes.
Goods movement within the states can much easier as many local state taxes which 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, which are evaded the particular GST.
However, when the duty cure for all cotton and synthetic fibers remains the same, prices of textile items made of cotton fiber could rise a little bit.
Nevertheless, the equal tax treatment policy will offer rise to man-made fiber production specific exports as well. 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 is really because while artificial and synthetic fibers contribute around 70% of the world’s total fiber consumption, they make up for less than 30% of India’s usage.
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