Impact of GST on the textile industry
The motto of GST is one tax one country. Therefore, GST was introduced in India to curb the multiple tax system and get a channelized and streamlined structure of tax system in India. GST- the goods and service tax was introduced in India and came into effect from 1st July 2017. Earlier there were different taxes imposed by different tax as well as the central government. There was a difficulty to calculate the tax, therefore with the implementation of GST there is one tax, and the system has become much simpler than before. GST is applicable on all the goods and services in India. The seller needs to get his business register under GST to impose GST. There are different tax slabs also, for different categories of products. With introduction of GST in the tax system of India, there have many effects on different industries. This article will discuss the impact of GST on the textile industry.
GST and the textile industry
GST has created a great impact in the textile industry. Textile industry is very important business industry in India; it caters for the largest exports industry. The tax slab for the textile industry is higher than comparison to manufacturers and traders in this.
GST has positive impact on textile industry.
- Break in input credit system- it will smoothen the input credit system and bridge the gap which was there before.
- Reduction in manufacturing cost- GST will greatly reduce other tax burdens such as octroi, luxury tax, entry fees, etc. this will reduce the cost of goods in textile industry.
- Input credit on capital goods- the GST will allow for input credit on capital goods, thereby allowing textile industries to import latest technologies in sector of manufacturing and produce the best quality products.
- Competitiveness- with implementation of GST, competition will boost among the key players in the industry. The price will be almost to a healthy competition level.
- More exports- one of the major benefits to this textile industry will be that of with GST, there will be more of exports and using of latest technologies as now producers will not have to wait longer for export license or incur heavy duty charges on export of products. This process will become easy with implementation of GST.
- Long term growth- with GST in the picture, textile industry will be able to expand its business in domestic as well as international arena. Thus, the business will have long term effect and there will be greater profits.
Apart from these benefits to the textile industry, same as every coin has two side, there is also a negative side of implementation of GST in the textile industry. And the disadvantages are-
- The cotton value chain will not benefit the traders. As the exporters will not be able to claim for duty, export duty will apply to products only.
- Tax burden for small businesses- small traders do not have much understanding of the GST system, so they will need to hire professionals, and also their income will come under GST, so there will much more tax burden compared as it was before implementation of GST.
- High operating cost- same as above, hiring of professional to deal with the system of GST, will include more of operating cost to small businessmen.
- New business software cost- before GST, textile traders was using ERP system for filing their taxes online. Now, GST software will be required which will be compliant to the system of GST. And also, people and the staff will have to learn how the system works.
- Increase in prices- since increase in taxes in some sectors of the textile industry, the products price will also increase.
With GST it will take time to settle and get adapted to the new tax system. Once all the polies and tax slabs are settled, there will be proper and better channel for taxation. And people will get used to it, this is also better and a uniform system which will be beneficial to understand for both businessman and common public. It will bring balance and uniformity in financial system, and also will be easier for government to keep a track of process and inflow and outflow of money. Both the government and industries will take some time to understand the system but it is for the betterment of country and one tax India.
With GST there are many different view and changes being made in different industries. Textile industry which is very important in India will also face a few challenges and advantages with implementation of GST. Industry will gain benefit of more exports, reduced manufacturing cost, input credit system, etc. And it will also have challenges like-higher operating cost, increase in prices, etc.