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 because of its finely created textiles in high demand all over the world. Despite such high demand, the textile industry in India was unable to 100% demand of Indian textiles both organic and man made.
The textile industry in India has witnessed several alterations in taxation under the new GST regime. The implication of GST will affect the business and its growth in future. The textile production process which includes synthetic & artificial fibers and naturally created fibers.
The GST regime offers many advantages to the industry players in the domestic market that focus on 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 easy taxation process to get 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 country’s exports in textiles leading to the loss of revenue.
Cotton based textiles are an important part of the nation’s economy and duty relaxation plays a vital 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 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 kids and existing businesses decide to buy and sell synthetic and artificial materials.
In 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 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 production 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 split into nine categories when we talk with regard to the taxation routine. The current taxes vary from 4% to 12% based on these aspects.
Further, unorganized players are usually given tax exemptions according to the dimensions of their operations dominate the textile community.
There will vary 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 with the GST, there will be uniform taxation policies which will cause an obstruction as the input taxes will be eliminated since GST is really a consumption taxation. Zero rating on exports under GST will increase exports further without the various subsidy schemes.
Goods movement within the states tend to be much easier as many local state taxes which levied using a 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 through the GST.
However, generally if the duty treatment of all cotton and synthetic fibers remains to be the same, prices of textile items made from cotton fiber could rise a little.
Nevertheless, the equal tax treatment policy will provide a rise to man-made fiber production and its 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 that while artificial and synthetic fibers contribute around 70% of the world’s total fiber consumption, making up for less than 30% of India’s usage.
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