The textiles industry faces a unique issue in the presence of a differential duty structure both in different fibre value chains and within specific value chains too. This situation was prevalent in the earlier tax regime and is still relevant for the new GST regime.
The result of such a structure is the accumulation of duty at a certain point in the value chain wherein the duty paid on the input is higher while the duty on the output is comparatively lower. This accumulated duty is embedded in the cost of the final product by the seller as he/she is unable to set off the input duty which in turn leads to higher prices, Sumit Parmar of Wazir Advisors writes in an article.
Now, with the onset of higher duties, the quantum of duty accumulation will increase which will lead to further increase of prices, according to Parmar.
The article looks at the complete textile value chain and finds that GST has failed to resolve the issue of differential duty structure in the industry as well as the issue of fibre neutrality.
– Apparel and Textile News, Apparel Talk, Indian Apparel
