Goods and Services Tax Impact of GST on Textile Industry

Impact of GST on Textile Industry

Impact of GST on Textile Industry

Impact of GST on Textile Industry

The textile industry and especially the cotton value chain are going to be affected negatively by the changing GST rates. Although the GST rates are not announced yet it is likely to bring a great change. Dr. Arvind Subramanian Committee has recommended putting down the rate by 12%. Presently, the textile industry is attracting zero central excise duty and the condition is going to worsen if this is followed.

The state VAT is 4-5% on apparel. There is a 1.2% effective excise duty on branded garments with a price of more than Rs 1000. The incidence of the overall tax on the finished goods which are the apparel is much lower than 12%. This is the lowest rate proposed by the GST.

The apparel retailers will not have sufficient input credits at a 12% rate. Therefore they cannot offset the tax liability which they have increased. The cotton players within the spinning industry will be affected adversely. There will be an adverse impact on the manmade spinning sector which is currently being taxed due to GST.

The manufacture of fabric is carried out by the SSI sector. Here many of the companies operate under the scheme of composite taxation. This can be applied in cases where there is a turnover of up to Rs 1.5 crore. One cannot claim the ITC on purchases from suppliers under the composite scheme.

You may also read about the Effect of GST on Advertisement and Cinema Industry

OPTIONAL ROUTE TO PAY GST TAX:               

The ICRA points have pointed out that most of the cotton-based textile players in the value chain operate through a route that is optional. This means that there is zero tax with no ITC, which in turn results in lower duties. Exemption on cotton is one of the key reasons. Therefore there is lower ITC for cotton spinning mills. Also, the cotton yarn manufacture seeks the optional duty route. This they do without claiming ITC and hence they pay zero excise duty.

The following line, “with an optional duty structure at the cotton yarn stage itself, the downstream sectors, i.e. weaving, processing, and garments also operate under the optional route .” this line has been said by the vice president of the Corporate Sector Ratings.

CAPITAL INVESTMENT

The indirect taxes payable on the sales can be set off against the generally paid indirect taxes on the capital goods. The capital-based textile exporters generally purchase imported capital goods under the Export Promotion Goods Scheme. This enables them to take the full exemption on payment of customs duties. This will only be provided if they export six times of the duty saved over a period of six years.

DUTY DRAWBACK

The tax credit for exporters will become easier to fulfill by getting input tax credit chains becoming more transparent and integrated. The duty drawback scheme aims to provide a credit of indirect taxes which may lose relevance under GST.

There are cases where the current duty drawback is lower than the incidence of indirect taxes on inputs. In this case, the exporters will benefit under GST because of the improved transparency on the level of indirect taxes under GST.  The converse happens where the drawbacks rates are higher than the actual incidence of indirect taxes on inputs.

We can also read about GST Impact on Import and Export

Disclaimer: The content of this post isn't considered to be professional or legal advice, We aren't responsible for any damages arising from your access to the location content & must not be relied on or used as a substitute for legal advice from a lawyer professional in your jurisdiction. CARajput is among India's big digital compliance services platform which committed to helping people have started & developed their businesses. We had started with the goal of creating it easier for start-ups to start out their business. Our main aim is to assist the businessman with applicable laws & regulations compliance and providing support at each & every level to make sure the business stays compliant and growing continuously. For any query, help or feedback you may in touch on singh@carajput.com or Call or what’s-up on 9-555-555-480

Share This Post

Related Articles

Related Videos


Types of GST Returns: What is GST Return? | All GST Returns | Types of GST Returns and Due Dates

Types of GST Returns: What is GST Return? | All GST Returns | Types of GST Returns and Due Dates

 

Published On: Nov 09, 2021 | By: RJA


E-Invoicing Under GST? | E-INVOICING ? | All About GST E-Invoice

E-Invoicing Under GST? | E-INVOICING? | All About GST E-Invoice

Published On: Nov 12, 2021 | By: RJA

Need help?

Request a call
from a RJA
Business Advisor.

LET'S TALK

Private Limited Company

Popular Categories

Browse Blogs

Recent Posts

All about the Equity Linked Savings Scheme & its Returns

All about the Equity Linked Savings Scheme & its Returns

New Functionality of the interest calculator in GSTR-3B

New Functionality of the interest calculator in GSTR-3B

How to respond notices for AIS (Annual Information Statement) mismatch?

How to respond notices for AIS (Annual Information Statement) mismatch?

Payment of TDS via using Form 26QB on sale of property

Payment of TDS via using Form 26QB on sale of property

RBI intends to tokenisation assets, bonds as part of the wholesale CBDC pilot.

RBI intends to tokenisation assets, bonds as part of the wholesale CBDC pilot.

Connect with a RJA Advisor

Fields marked with an * are required

Enquire Us

Please send us your query and we feel very happy helping you

Testimonials

  • Thank you very much for all your help in setting up my new company and clearing up all outstanding business in my sole trader accounts. For the first time in years I have peace of mind regards my business accounts. Your workforce are a credit to you, the girls at reception are so helpful and Chris has been brilliant. It is very much appreciated.

    A US consultancy group

  • Rajput Jain & Associates. are a tremendous value added to me as an executive and a busy parent. It just makes sense to delegate my tax file to them -- they are proactive, extremely service oriented, and most importantly, I am completely confident they are finding every dollar of tax savings available to me.

    A Leading Service Provider

  • We use Rajput Jain & Associates for all our accounting, Corporation tax, VAT and other compliance needs. The service is professional, courteous and prompt. I would recommend Rajput Jain & Associates to any company requiring a comprehensive accounting and tax service.

    A Leading Consultancy Firm in Dubai

Money Back Guarantee

Not happy with the service? You can request a refund at anytime within 30 days!

24/7 Support

Get support through phone, email, mobile app or live chat - 24/7, 365 days.

EMI Payment

Easily pay online with EMI payments, credit or debit card, net banking, PayPal and more.

Get In Touch--

Rajput Jain & Associates

Add: P-60, Connaught Circus, Connaught Place, New Delhi-110001

Email: singh@carajput.com

Phone: 9555555480

Legal Disclaimer--

The information contained on this website merely provides details of our firm to persons who have shown interest in knowing more about us and is not intended to solicit work or advertise our capabilities in any manner. The information provided on this website is general in nature and should not be used as a basis of decision-making without further professional advice. The third party site links are only provided for ready reference of the users and CA Rajput Jain & Associates neither controls their content nor undertakes any responsibility regarding them.

© 2016 Rajput Jain & Associates. All Rights Reserved | Sitemap

Call Email