Implications of GST on Textile Sector

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Effects of GST on Textile Sector

• DEVELOPED BY SAG INFOTECH PVT. LTD.

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Implications of GST on textile sector

• Textile sectors plays a very important part in
  the development of the Indian economy with regard
  to GDP, Export promotion, employment, etc.  
• It is one of the oldest manufacturing industry in
  India. The textile industry is the second largest
  industry which provides skilled and unskilled
  employment.  

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Implications of GST on textile sector 

• In this sector, 100 FDI is allowed by the
  Government under the Automatic Route. Textile
  Industry offers more than 10 in Total Export.
• Mainly Two types of Indirect Taxes are Central
  Excise Duties or cenvat and Service Tax.

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Implications of GST on textile sector  

• Since textiles industry are goods, the connection
  of service tax is only with respect to service
  inputs into textile outputs.
• Under current taxation regime, textile products
  are frequently exempted or are taxed at very
  cheap rate. State Governments have end levying
  Sales Tax after the discontinuation of Additional
  Excise Duty.

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Common Issues Under Textile Industry Taxation

• Input Tax Credit Breakup
• The textiles industry comprises of dual regular
  and composition taxpayers. Almost of the industry
  are being in Structure Segment. Numerous
  transactions in the textiles industry flow from
  the unorganized sector to the organized sector
  and vice versa. Where Regular/Registered Taxpayer
  buying goods from composition Taxpayers, they are
  not qualified for Input Tax Credit, thus breaking
  the Cenvat Credit chain. Input Tax credit paid on
  the previous transaction is covered in the value
  of the product making the product costly.

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Common Issues Under Textile Industry Taxation

• Small Business Compliance Cost composition
  scheme of Taxpayer is doubtful to join because of
  Credit chain as it raises the assent cost of
  engaging professional to meet their Tax
  obligation.

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• All Other Taxes to be Covered in GST
• Supply chain of Textile Industry is stored with
  input and output across state boundaries to reach
  the final consumer. Octroi and Entry Tax are the
  bottlenecks, credit of which are not allowable,
  thus form the component of the value. Subsume of
  octroi, entry tax, entertainment tax, luxury tax,
  etc. into GST will eliminate the cascading effect
  at the distribution stage.

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Implications of GST

• After the application of GST, there will be a
  rise in the effective tax rate to have a negative
  result on the textile sector as compared to
  present taxation.
• As CGST and SGST rates are likely to be larger
  comparing current textile sector rate, this will
  result in the larger revenue to the Central and
  State Government and Textile Prices will rise.
  Services are used in Input, this effect would be
  nullified as all input tax will be rebated

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Implications of GST 

• In the present taxation scheme, taxes are being
  paid on input and being added to cost as the
  finished products are exempted from Taxes. In
  GST, Textile Output will be taxed and Input Tax
  will be discounted whether in the case of export
  or for domestic use, making taxation transparent.
• Taxes paid on purchase and installation of a
  capital asset and material can be claimed as
  Cenvat credit. This will lead to up-gradation and
  expansion of the Textile Industries with latest
  Improved technologies.

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Implications of GST  

• Compliance cost will be lower
• Fiscal barriers will be removed with the
  interstate movement of Textile Input and output
  taxes.
• Under GST, All Fiber will be treated in same way.
  No difference between cotton fiber and man-made
  fiber is there till now in the defined GST
  Structure

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conclusion

• Overall GST will significantly change the present
  structure of Textile Industries. GST will result
  in transparency, the tax burden will shift to the
  ultimate consumer by claiming the credit of taxes
  paid on input. Still, GST rate is to be prepared,
  it may lead to the bigger tax burden on textile
  units. But the impact on demand will be neutral.
  It will encourage widespread development and
  growth in Indian Textile sector.
• READ MORE _at_ 
• http//blog.saginfotech.com/gst-impact-on-textile-
  industry-india

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