Textile Market

A blog article explaining how GST rates will effect the Indian textile market and what that means for India’s textile industry in terms of the industry’s financial future. Check out the full article here.

The GST Rate Today

GST, which stands for Goods and Services Tax that is to be rolled out on July 1st 2017, will have a significant impact on the Indian textile market. The GST Council has been under intense scrutiny for their decision, which at the moment is 7-15%, based on 6 categories of goods. However, there are 144 products called ‘Champions’ where the rates will range from 0% down to 25%. Champions now include more luxury and character driven items like e-commerce clothing and watches. Some of the other categories such as tax on luxury restaurants, hotels and travel services have also been put up for a reduction.

How GST will impact consumers hasn’t been unduly studied, but even consueters in the fashion and retail industry are unclear about how this will impact them in the long run. Some have vowed not to buy anything that is sold under GST, if it does put them under a loss. “Though everyone feels huge GST is being implemented across India for the first time. As a tax, GST is not like the usual VAT that is levied on items that fall under its scope. In order to understand how GST will affect the Indian textile market in the coming two years, it is quite important to look at prevalent taxation rates today and how they will change coming 2021 to 2022.

How GST Rate Achieved in Other Countries

The Indian textile market has shown signs of exceptional growth. The textile sector in India is composed of companies that use many outdated technologies including past labour-intensive methods. These methods have severely affected the country’s imports and exports of textiles. GST is a tax on goods and services that replaced a range of central and state taxes like VAT, Service Tax, Entry Tax, Octroi etc. GST is governed by GST council which includes the Union Finance Minister and States. Besides India, 18 other countries have adopted GST model in between 2006 to 2013. These are: Australia, Brazil, Canada, China, France India has its own structure while Japan as well as Singapore also follow the same set up.

The Impact of GST on the Indian Textile Industry

GST will be introduced in to the Indian textile market in January 2017. There have been varied opinions expressed on the effects of GST on the textile industry but most of these are optimistic, especially since GST rates will range between 5 and 25 percent. This will be possible because while GST was applied only to finished products, the rules governing taxability have maintained a separate taxation regime for raw materials. Therefore, the price of raw materials ends up equalling the tax paid by manufacturers.

Product Category Tax Rates Optional Tax Rate (%) Current Final Duty GST is the most widely expected transformation for consumers and businesses in India. It will impact on almost every industry, impacting the textile industry by reducing the burden of indirect taxes and incentivizing investment.

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How Different Types of Businesses are Impacted

The GST rate is a universal form of taxation in India. It is a key tax system in this country that has replaced a wide range of central and state-level taxes, including excise duty and sales tax. The direct impact of the GST on most businesses will be felt by all businesses because they are not tobacco manufacturers alone. Even general merchandisers will face more stringent competition because unlike the LPG (Liquefied petroleum gas), their wares cannot be exempted from taxation. At the time of filing the GST Returns, businesses need to calculate certain per cent of their taxable turnover and accordingly pay the GST Rate applicable on that turnover. Clothes Under Rs. 500: 0% rate

Clothes Over Rs. 500: 18% rate

Clothes That Contain Knit Fabrics and Cotton/ Rayon: 12% rate

Clothes That Contain Wool, Silk and others woven fabrics and fur : 18% rate

Clothing with Crochet: 24% rate

Non-Textile Goods: 28%

Blog Conclusion

With the GST seeing a clarification by including textiles into the tax base and with less subsidies, the textile industry can see an increase in revenues could result in a boost in investments. Tags: economics GST will gradually reduce the income for textile manufacturers and increase consumers in the long run. However, it is important to adapt and continue to focus on CSR projects with other stakeholders. “It will be interesting to see how manufacturers decide to move forward with their business, but considering that the recovery period may stretch out beyond the five years, let’s use this opportunity to restore some of the losses incurred from GST and continue our CSR efforts.”

By admin

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