Textile Industry in GST, Impact of GST on Textile Industry
About Textile Industry
a)One of the oldest Industriesb)One of the largest contributors to Indian Exports. Contributing about 11% of total exports of the country.c)Largest labour employment industry.d)The Textile industry can be broadly classified into two segments:1.Yarn & Fibre (Natural & Man-made)2.Processed Fabrics, Ready-made garments & Apparels
Current Taxability on Textiles
a) In 2004, exemption was granted on textile articles falling under chapter 61, 62 and 63 from duty of excise by issuing Notification No. 30/2004b) It was again subjected to duty in 2011-12. After remaining liable for one year, it was rolled back by then finance minister P Chidambaram and since then textile was out of central excise purview.c) In Union Budget 2016-17, branded readymade garments has again been made liable to duty of excise.d) Notification No. 15/2016-CE has been issued amending the original exemption notification 30/2004 . By Virtue of this exemption is withdrawn on all goods falling under chapter 61, 62 and 63 of CETA bearing a brand name or sold under a brand name and having a retail sale price (RSP) of Rs.1000 and above. There would be two options for payment of duty: 2% without Cenvat and 12.5% with Cenvat.e) Most of the textile products are either exempt or are taxed at a relatively lower rate and are extensively subsidized under different central and state regimes. Exports have continued to be free from taxes.f)Non-branded goods continue with “Nil” levy without CCR benefit. Otherwise, option of paying 6% with CCR in case of garments / articles of cotton, not containing any other textile material is available.g) Job Work In garment industry many times, brand name owners outsource the goods manufactured completely or on job work basis. There are special provisions that the central excise duty levy which in normal course should be with the job worker gets shifted to brand name owner. Such brand name owner instead of job worker needs to register and comply with excise provisions. Brand name owner alternatively could authorize his job-worker to obtain registration and pay the duty on goods.h)Most of the states in India has exempted textiles and fabrics from levy of VAT. Garments including textiles are being subject to lower rate of VAT in many states. For example, in Karnataka state, ready made garments and other articles suffer lower rate of 5.5% tax. Textiles are exempted from VAT.i)For small players, the option of paying taxes at concessional rates is also provided under composition scheme in many states.
Comparison between current rates vis-à-vis GST Rates
Issues in Current Tax Structure
Impact of GST on Textile Sector
Recommended Articles Others : Nil (W/o Cenvat) and 12.5% w.o. CENVAT As a result, ITC claims will have to be backed by full information chain of purchases and sales. Improved compliance will automatically lead to higher revenues. If the Rate is expected to be come out as 12 % ,the apparels retailers will not have sufficient credits available to be set off if the GST is not levied on yarn and fabrics. Taxes paid on purchase and installation of capital asset and equipment can be claimed as Cenvat credit Composition scheme shall be available. Also, separate registration may be obtained for business verticals
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