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07-September-2016

The government are on the verge of witnessing the implementation of the most awaited indirect tax reform in India, the GST, expected to be a growth stimulator. But whether this growth stimulator will support the booming textile industry in India or will it take the industry to a new low is a wait a watch situation.

The government has so far incentivised the textile industry that has been one of the largest contributors to the country’s exports and provider of jobs to million. The latest being the Rs. 6,000 crore textile booster package in June this year, which has increased the duty drawback significantly.

Presently the textile industry is plagued with several issues including classification disputes, differential taxation of cotton and man-made fibre, higher rate for composite mills than power looms and so on.

The industry is a beneficiary of several exemptions through the value chain, thereby reducing the tax incidence to an average rate of 8.9 per cent. Additionally, the current rate of tax on branded apparels is much lower than the proposed 12 per cent GST.

This is important for this industry to have enough breathing time to cope with higher tax rate. While under GST the concept of outright exemption is unlikely, in order to ensure profitability and sustainable growth path for the industry.

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