'One nation, one tax' is a great concept. Since the economic reforms undertaken by the PV Narasimha Rao government in 1991, this has been the single-most major reform which will impact the country in a major way. The current taxes in the textiles industry vary from 4 per cent to 12 per cent based on different categories, while the unorganised sector has been given tax exemptions based on size. This situation has brought in a lot of disparities. GST will now bring in a level-playing field for all the players in the industry. A uniform tax rate will also result in efficient movement of goods in the supply chain, thus increasing the productivity and efficiency of the textiles industry. Since exports under GST would be zero rated, it would give a major boost to the country’s textile exports against the stiff competition at the global level. However, the tax on garments priced above Rs 1,000 will be at a higher rate than today. This will negatively impact this segment.
Effective from July 1, 2017, GST on blended yarn is 18 per cent, which will result in escalation of the price of the finished product. The tax burden will shift to the ultimate consumer.
It is going to affect the textiles industry, as the announced GST rate is way different than the existing tax rates. So, by all means, the end-user is going to get affected as the cost of finished products will be on the higher side. As per my understanding, small-scale industrialists who currently are not running their industries under excise will be highly affected due to a major change in the tax rates.
I hope that with the GST implementation, the cascading of taxes will be controlled. The revenue loss due to different taxes against which input credit cannot be claimed will be eliminated or reduced.
Published on: 30/06/2017
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