Today we will discuss the implication of GST in Textile sector. what are benefits of the GST and what are the unadvantage of the GST. things to be checked for the implementation of the GST in textile sectors.
Implementation of GST in textile sector
Manufacturing unit –
Manufacturing unit can get the benefits of closing stock in hands. he can get the benefits of any duty paid in chemicals, raw material etc. Confusion is whether they will get the full credit or Deemed credit. As they have duty paid invoice of excise but they are not registered in excise.
Trading unit –
Trading unit may get the deemed credit in GST. Still provision not clear
Why GST should not be applied to Textile Industry.
Small Business Compliance Cost: Many small people are doing the textile business. it will increase the hardware and software cost
Unorganized Sector – Almost 5-7 Process has been done in making dress from fabrics. GST will be levied at each stage and many JOB worker are too small they will not be able to take the GST number and maintain it. The burden of the GST will be on the trader as he has to pay the tax on Reverse charge .
Input tax breakup – If job worker has taken number in composite sector than he will not be able to pass on the GST credit. It will increase the cost of fabrics. Also if Job worker is below the threshold limit (18 laks) it will not be able to take the credit on chemical.
Increase in the cost – Textile industry do business in the principal of Low profit margin and high volume. Previously vat/excise are on initial stage only, now it will be levied at all stage. Alos rate is on higher side.
Branch transfer – Textile process will happen in various stage. Many process are happen in different state People need to pay the tax at every stage.
Liquidity problems – Tax to be paid on every month. As we know there is long gestation period People are saleing goods on credit
No Refund –Provision of refund is not in fabrics
Benefits to Textile sectors
Input credit allowed on capital good
Taxes paid on purchase and installation of capital asset and equipment can be claimed as Cenvat credit
Input credit on chemical Raw material
Dealer will get the credit of each and every items.
In our view large trader will get the benefits in GST, person having all the process are in In-house can take all the credit on machinary,chemical etc as there is no laping of credit. Small trader costing will be high compared to large sector.