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 turmoil. Despite such high demand, the textile industry in India was unable meet up with 100% demand of Indian textiles both organic and phony.
The textile industry in India has witnessed several alterations in taxation under fresh GST regime. The implication of GST will affect the industry and its increase 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 aim at 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 as well as simple taxation process will 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 a 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 impacts revenue.
Cotton based textiles are an important part of the country's economy and duty relaxation plays a vital role in business expansion in different regions. 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. Whole 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 shop for and sell synthetic and artificial fabrics.
In look at ICRA, a lesser rate of 12% is usually recommended by the Dr. Arvind Subramanian Committee is likely to have a negative impact on the textile category. 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, if the fiber attracts excise duty at the development stage (unlike cotton). Hence, there can be an incentive for your downstream players in the synthetic sector to avail the Input Credit Tax (ITC).
The textile industry is broadly put into nine categories when we talk by the taxation routine. The current taxes vary from 4% to 12% based on these categories.
Further, unorganized players in which given tax exemptions according to the size of their operations dominate the textile part.
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 of the GST, blogs uniform taxation policies which 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 that are levied on his or her 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 the particular GST.
However, in case the duty remedy for all cotton and synthetic fibers continues to be same, prices of textile items made of cotton fiber could rise a tad bit.
Nevertheless, the equal tax treatment policy will offer you a rise to man-made fiber production will be exports too. 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 by far the total fiber consumption, create up safeguard 30% of India's demand.
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