Importance of GST(Goods and Services Tax) For Textile Industry

The Goods and Services Tax or GST is a form of Value Added Tax which is predisposed to include all the indirect taxes and would be the same for every region of the country unlike the VAT. Simply put, the GST will allow the state government to get a share that was earlier entitled only to the centre in the form of Central Sales Tax.The Goods and Services Tax, if and when approved will benefit the textile industry in more than one ways, and hence it is only just to study the importance of GST in this context.


The first and foremost aspect that will make the GST act as a boon to the industry will be the fact that the tax burden would shift from the manufacturers to the consumers since it is a consumption tax. Needless to say, it will give manufacturers the freedom to enhance their business models, which will in turn lead to a better GDP.

The implementation of GST would mean that all input taxes will be rebated, pertaining to the zero-rating which will be not just be confined to textiles, but will extend to capital goods as well as  textile related machinery. Moreover, this would also enhance the transparency in the taxation system, which will be a welcome change. Again, the zero-rating will be applicable to all exports, which in-turn will boost the exports without any need of introduction of subsidized schemes to the industry.

One of the most beneficial aspects of the GST lies in its uniformity, which implicates that the same rate of taxes will be applicable throughout the various segments of textiles. It will thus ensure that the present classification of fabrics vis-à-vis garments will be eliminated. This will in turn facilitate the use of new mixes and blends thus leading to better quality and increased variety of products! Since, there would be no tax implications, even new experimentations in this regard will become viable.
Moreover with implementation of GST goods movement within the states will also be much easier as lot of local state taxes which are levied on the borders of states which inhibit free movement of goods will be removed. This will help in improving the productivity & efficiency of the textile industry as now more factories/manufacturing units can be set up in various textile hubs across India without worrying for various state taxes which were earlier levied indirectly.

The current rate of taxes in all developed countries vary from 10% as in Australia to 20% as in UK. The Indian textile industry is looking forward to a tax rate of 12% which is neither too ambitious nor unassuming. In fact it is supposed to prove rather effective since it is in tandem with the current rate of taxes across the world.

With all of the above mentioned benefits, it is more than just to come to the judgement that GST will bring about an elevated level of efficiency in production, thereby resulting in a decrease in the retail prices of all related items.
Needless to say, the implementation of GST will play a far bigger role in bringing consistency and organisation to the textile industry than any other measure has ever brought along.