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GST to have positive impact on textile industry: ICRA

21 Jun '17
2 min read

The impending Goods and Services Tax (GST) which is slated to be rolled out from July 1, will have a positive impact on the textile industry of India, as compared to the current tax policies, according to a recent report. It captures the impact of multiple existing taxes such as excise duty, value added tax (VAT), central sales tax (CST) and octroi.

The effective tax incidence on man-made fibre (MMF) and cotton is in the range of 5-7 per cent, while blended textiles fall under the 11-14 per cent range, says a report by ratings agency ICRA. The GST slabs under which these items are placed are more or less similar to existing tax rates, hence are less likely to impact these categories.

As for wool and silk textiles, the GST rates are lower for them at 5 per cent, compared to current tax of 8-10 per cent, according to media reports. However, fabric producers operating under composition scheme for which input tax credit is unavailable, are likely to face some challenges as apparel producers will prefer to avail ITC by working with GST-compliant fabric suppliers.

This move will push fabric producers to be GST compliant. Additionally, as cotton yarn will also come under GST, fabric producers' who do not available of the ITC will see a fall in their incentives as this will reduce the competitiveness of fabric producers, notes the ICRA report. (KD)

Fibre2Fashion News Desk – India

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