Indian Textile Industry Seeks Uniform 5% GST Rate from Prime Minister
The Indian textile industry is advocating for a consistent 5% GST rate across its entire value chain, with over 471 Tamil Nadu mill owners petitioning the Prime Minister. This move aims to standardize taxation, as current structures differentiate between cotton and man-made fibers. A uniform GST would enable domestic manufacturers to utilize input tax credits, fostering a more equitable market. The final decisions from the upcoming GST Council meeting are expected to shape the future landscape of India's textile sector.
Over 471 textile mill owners from Tamil Nadu have submitted a collective request to Prime Minister Narendra Modi, advocating for a consistent 5% Goods and Services Tax (GST) rate across the entire textile value chain. This appeal was made through the My Government online portal. According to Prabhu Damodaran, Secretary of the Indian Texpreneurs Federation, while the association has formally engaged with the state government, individual mill owners felt compelled to submit separate petitions due to the significant impact this tax reform would have on their sector. The federation's objective is to establish a uniform 5% GST on all textile products, ensuring no item is exempted from this consolidated tax structure.
Current Tax Structure for the Textile Industry
Approximately 60% of India's textile sector and 80% of its textile and apparel exports rely on cotton, as per industry analysts. Presently, the cotton supply chain benefits from zero central excise duty, an optional provision, while man-made fibers are subject to excise duty during production. A standardized GST regime would enable domestic textile producers to leverage input tax credit (ITC) on their purchases, thereby lowering capital investment expenses. This change is expected to foster a more equitable environment for local manufacturers over time. The existing duty-drawback system for exporters will become obsolete under GST. However, certain industry segments might face reduced profit margins if current drawbacks exceed the actual indirect taxes levied on inputs.
Expected Outcomes and Preparedness for GST
Further clarity is anticipated following the tenth GST Council meeting scheduled for February 18th. Analysts anticipate a gradual transformation within the domestic textile industry, contingent on the ultimate tax rates established for the sector. Currently, the domestic market exhibits a 60:40 ratio of cotton to man-made fiber clothing, contrasting with a global average of 40:60. This ratio could shift significantly based on the final rates applied. While awaiting information on TCS limits, businesses are encouraged to begin preparations for GST implementation to avoid being unprepared. Key preparatory steps include:
- Completing GST enrollment promptly to understand its implications and processes. To read more about the enrollment process and its relevance, Click here.
- Meticulously planning logistics and warehousing needs, with detailed analysis of GST's impact on these areas. To read our detailed guide on impact analysis on logistics and warehousing, Click here.
- Integrating suitable technological platforms that facilitate GST compliance for business operations, to get all updates and access a pool of GST Calculators.
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