GST Rates for Textile Manufacturers

The final GST rates for the textile industry are yet to be announced. Industry experts have been asking the GST Council for a 5% levy across the manufacturing chain, and the last word on this is yet to come. We need few more clarifications before the textile sector can calculate what its tax liabilities will be post GST implementation.

Until then, we have news on some rates as per the decisions that were taken on the Day 1 of the Srinagar meeting of the GST Council’s fitment committee. The products and items used in the textile manufacturing process have been taxed according to the following structure:

Taxed at 12%

1. Wood articles: This includes all articles of wood such as clothes hangers, spools, cops, bobbins, sewing thread reels, and turned wood for textile machinery.
2. Final products wholly made of quilted or textile materials.

Taxed at 18%

• Textile oil: Includes all textile oils other than those that contain petrol, diesel, and ATF (Aviation Turbine Fluid).
• Finishing agents: Includes dye carriers, materials used to accelerate dyeing or fixing of dyestuffs, dressings and mordants.
• Machinery: This includes all machines for preparing textile fibres; spinning, doubling or twisting machines and other machinery for producing textile yarns; textile reeling or winding (including weft winding) machines and machines for preparing textile yarns for use on the machines.
  Also, the machinery for washing, cleaning, wringing, drying, ironing, pressing (including fusing presses), bleaching, dyeing, dressing, finishing, coating or impregnating textile yarns, fabrics or made up textile articles and machines for applying the paste to the base fabric or other support used in the manufacture of floor covering such as linoleum; machines for reeling, unreeling, folding, cutting or pinking textile fabrics.

Taxed at 28%

1. Lubricating oils and preparations: Includes oils and preparations of the kind used for oil or grease treatment of textile materials. Excludes those oils that contain 70% or more by weight of petroleum oils, or oils obtained from bituminous materials.
2. All ready-to-use products made from textiles: This includes products like travel cases, holsters and similar containers; travelling bags, insulated food or beverages bags, toilet bags, rucksacks, handbags, shopping bags, wallets, purses, map cases, cigarette cases, tobacco- pouches, tool bags, sports bags, bottle- cases, jewellery boxes, powder boxes, cutlery cases and similar containers made of textile materials.

Our Opinion

The textile industry has historically enjoyed tax exemptions on the cotton value chain. Currently, VAT is not applicable on fabrics, but yarn and garments attract VAT according to state rates. On an average, we can say that the items used by the textile industry such as machinery and chemical agents have been taxed at around 20% throughout the country. After GST, the average tax rate will be lowered to around 18%.

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