GST on textiles

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                                                                  INTRODUCTION

Goods and Services tax (GST) has been identified as one of most important tax reforms post-independence. It is a tax trigger, which will lead to business transformation for all major industries.

Given the passage of the Constitution (101st) Amendment Bill, 2016 for GST in the Parliament on 8 August 2016, ratification of the said Bill by more than 15 states by early September followed by its enactment, and passage of four GST Bills in the Lok Sabha on 29 March 2017 and Rajya Sabha on 6 April 2017, with the clear road map being laid down by the Finance Ministry, the Government of India seems to be on course to implementing GST with effect from 1 July 2017. The implementation seems to be pretty obvious after meeting of GST Council after 18 June 2017. BACKGROUND OF TEXTILE SECTOR

BACKGROUND OF TEXTILE SECTOR

Indian Textile industry is built with the fabric of organized sector at one end while on the other end there is the unorganized sector, and both these extremes perfectly co-exist, contributing to a significant part of our Indian economy. The textile industry today contributes to around 11% of the total exports made from India. It is imperative to note that the industry contributed $40 billion of exports during the FY 2015 - 2016.

EXISTING INDIRECT TAX STRUCTURE FOR TEXTILE INDUSTRY

Currently, indirect taxes are levied by the Central and State Governments. Central taxes comprise of Central Excise, Central State Tax on Interstate Sales and Service Tax on services and state taxes consist of Value Added Tax on Intra-State Sales and Entry Tax. Presently, the textile industry enjoys considerable amount of benefits on the indirect tax front. The textile industry is either exempted from payment of excise duty or excise duty is paid at lower rates. Exports of textile products are subject to nil rate of duty. However, there is no exemption on Central Sales Tax or State VAT except for Grey / Knitted / Processed Fabrics.

Various Segments of Textile Industry



Service Tax, Entry Tax, Excise Duty and VAT/CST on Textile Products: Service Tax: Carrying out an intermediate production process as job work in relation to agriculture, printing or textile processing is exempt under service tax by virtue of Mega Exemption Notification No. 25/2012 Entry Tax: Currently Entry Tax levied in some states Such as Maharashtra, Gujarat and Karnataka. Excise Duty and VAT/CST Textile has been subjected to duty of excise at different point of time. In 2004, exemption was granted on textile articles falling under Chapter 61, 62 and 63 from duty of excise by issuing Notification No. 30/2004. 

PROPOSED GST FOR TEXTILE INDUSTRY



A recent amendment notified by central government finance ministry on rate of gst on workers is 5%,which was higher (18%) earlier.

Disclaimer:- Any amendments or change willl be updated later in this blog. Be tune for updated.

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