Current tax for the textile value chain
Experts say that about 60% of the Indian textile industry and 80% of all textile and clothing exports are cotton-based. Currently, the cotton value chain attracts zero central excise duty (under the optional route), while the man-made fibre sector attracts excise at the manufacturing stage. With a uniform GST, textile manufacturers providing for the domestic market will be able to use ITC (input tax credit) on their goods, thus reducing the costs of capital investments. In the long run, this should create a more positive and level playing field for all domestic manufacturers.
Duty-drawback offered to exporters under the current tax structure will lose its relevance under GST. Some sectors, however, may see profitability pressures if the drawbacks are higher than actual indirect taxes on inputs.
The final verdict
Much will become clearer after the tenth meeting of the GST council on February 18th. Based on the final tax rates decided for the textile sector, experts predict that there may even be a gradual shift in the domestic textile industry. Presently, the ratio of cotton to man-made fibre clothing in the domestic market is 60:40, as compared to a global ratio of 40:60. But this can change depending on the final rates applicable to the sector.
While we wait for details on TCS limits to emerge, it would be good if you a seller took the first steps to becoming GST-ready. This way, when the change comes, you will not be caught off guard! So, what can you do to be prepared for GST? Glad you asked:
- Get your enrollment done on time. To read more about the enrollment process and its relevance, Click here.
- Plan your logistics and warehousing requirement carefully. To read our detailed guide on impact analysis on logistics and warehousing, Click here.
- Adopt such platforms, technologies which will enable your business to be GST-compliant. Click here to get all updates and access a pool of GST Calculators.
Want an expert to explain GST to you? Get one, right here!
