Research

faculties research paper 

RESEARCH PUBLICATION PAPER

Sr.no	Faculty	International	National	State	Other	Total
1.	Dr.U.R.Mane-Patil	06	09	03	10	28
2.	Mr.Vijay Patil	02	08	01	10	21
3	Mr. Santosh Borate	02	03	02	11	18
4	Smt.Pramila Jadhav	2	03	01	05	11

STUDY ON IMPACT OF GST ON TEXTILE INDUSTRY

                                                   Prof. Santosh D. Borate

                                                                         (Asst. Professor)

                  

Abstract

This paper is an analysis of what the effect of GST (Goods and Services Tax) will be on textile sector. GST (Goods and service tax) is effective from 1^st July, 2017 as per the government. The rates of GST are 0%, 5%, 12%, 18% and 28%. GST has been given approval by all state assemblies and consented by all. It is an accepted fact that GST is not simply a tax change but a business change as it will impact all purposes of an organization such as finance, product pricing, supply chain, information technology, contracts, commercials etc. Thus, it is imperious that all these efficient teams should be conscious about the GST. The objective of this research is to bring out the impact of GST on various sectors and how these sectors would manage their way out to tackle their increased cost. The execution of the integrated tax structure in India would bring tax insurrection in the country. GST is a widespread, indirect, multi-stage, destination- based tax that will be imposed on every value addition. The goods and services tax (GST) is considered at creating a single integrated market that will directly affects all sectors and sections of our economy. Thereafter, I have discussed the old indirect tax regime system and then an effort has been made to examine the impact on textile sector under GST regime and finally, the paper draws out a conclusion.

Keywords: Goods and service tax (GST), Indirect tax and Textile sector.

A)  Introduction:

The introduction of Goods and Services Tax (GST) is a very significant step in the field of indirect tax reforms in India. By amalgamating a large number of Central and State taxes into a single tax, it would mitigate cascading or double taxation in a major way and surface the way for a common national market. From the consumer point of view, the biggest advantage would be in terms of a reduction in the overall tax burden on goods, which is currently estimated to be around 25%- 30%. Introduction of GST would also make Indian products competitive in the domestic and international markets. The One Hundred and Twenty Second Amendment Bill of the Constitution of India, formally referred to as The Constitution Act, 2016, introduced a national Goods and Services Tax in India from 1^stJuly, 2017. The GST law is likely to change the whole situation of current indirect tax system. It is considered as biggest tax reform since 1947.

B)   Review of Literature:

GST stands for a coherent tax system which will colligate most of current indirect taxes and in long term it will lead to higher output, more employment opportunities and flourish GDP by 1-1.5%.It can also be used as an effective tool for fiscal policy management if implemented successfully due to nation-wide same tax rate.In the year 2000, for the first time the indication of introducing the GST was made by the then BJP Government under the leadership of AtalBehari Vajpayee. An authorized committee was also formed for that, controlled by AsimDasgupta (the then Finance Minister of the West Bengal Government). The committee was formed to design the model of the GST and at the same time examine the preparation of the IT department for its rollout. In 2011, the previous United Progressive Alliance (UPA) Government also introduced a Constitution Amendment Bill to facilitate the introduction of the GST in the LokSabha but it was rejected by many States. Now in year 2016 this bill got green indicator under the umbrella of Modi government. The GST is a consolidated tax based on a uniform rate of tax fixed for both goods and services and it is payable at the final point of consumption. At each stage of sale or purchase in the supply chain, this tax is collected on value-added goods and services, through a tax credit mechanism.

C)  Objective of Study:

The study has following objectives:

1)      To cognise the concept of GST.

2)      To study the key role of textile industry in the Indian economy.

3)      To study the pertinent issues in current taxation and GST under textile industry.

4)      To examine the impact on textile sector under GST regime.

D)  Research Methodology:

The researcher used an explorative analysis technique supported past literature from various journals, annual, reports, newspapers and magazines covering wide assortment of educational literature on goods and service Tax. In keeping with the objectives of the study, the analysis style is of descriptive in nature. Available secondary data was extensively used for the study.

E)   Role of Textile Sector in the Indian Economy:

India’s textile sector is one of the oldest industries in Indian economy dating back several centuries. It is one of key sector in Indian economy with a direct linkage to the overall growth of Indian and global economy. Textile plays a major role in the Indian economy India's textile market size (USD billion). It contributes 11 per cent to overall index of industrial production (IIP) and 5 per cent to GDP. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The industry accounts for nearly 15 per cent of total exports. The industry accounts for nearly 11 per cent of total exports. The textile industry has two broad segments. First, the unorganized sector consists of handloom, handicrafts and sericulture, which are operated on a small scale and through traditional tools and methods. The second is the organized sector consisting of spinning, apparel and garments segment which apply modern machinery and techniques such as economies of scale. The Indian Textile industry is amongst very few industries that is vertically integrated from raw material to finished Products. With potential growth opportunities in both the global and the domestic market it has leveraged its strong manufacturing position to achieve considerable expansion.

F)    Impact of GST on Textile Sector:

As per the recommendation by the Dr. Arvind Subramanian Committee if we consider 12% rate, the textile sector is likely to be negatively impacted. The cotton value chain is likely to be the worst affected as it is currently attracting zero central excise duty and tax in inputs may not be more than 2-4%.

v  Some Positive Impact on Textile Industry:

1)      Improved compliances: A remarkable effect of GST would be to improve compliance. The value chain under the GST will be fully traceable and will automatically lead to higher revenues.

2)      Revenue Neutral rate (RNR) proposed to be higher under GST:CGST and SGST rates are likely to be higher than the existing textile sector rate. This will lead to higher revenue to the Central and State Governments leading to increase in Textile Prices.

3)      Duty Drawback to lose relevance:With Input tax credit chain becoming much more integrated and transparent and hence, the tax credit for exporters will become simpler and easier. Also, full credit of indirect taxes can be claimed but the duty drawback scheme could lose relevance under GST.

4)      Transparent Taxation: Textile players which are oriented towards domestic markets will be able to set-off the GST paid on domestic capital goods. This is basically due to the reason that their sales will be subject to GST.

v  Some Negative Impact on Textile Industry

1)      Goods Transfers as Stock: Transfer of Goods from one place to another place will be liable for GST if it’s inter-state trade. If separate dealerships are obtained with separate GST registration number, then any transfer of supply between such dealerships will also be liable for Goods and Sales Tax.

2)      Advance Booking: As this sector requires advance booking of Goods so that market demands are met, which is done on payment of certain amount considering as token money with no VAT is not being paid on such advances, in GST System Tax one has to pay on advance received for booking

3)      Road Tax/ Environment Tax: In the GST System, GST must also include Road Tax, while presently, Service tax or VAT is not paid on the Road Tax element.

4)      Post Supply Discounts: Various discounts received by dealers from its manufacturers based on targets, goods lifted etc. will not be allowed as deduction from the value if the same is not linked to any invoice in the GST return.

G)  Findings:

Major changes in tax rates specific to textile inputs/outputs: 1. Excise duty on fabrics made from cotton alone increased from 5% to 6% 2. Excise duty on synthetic textile inputs such as polyester and viscose also increased to 12% 3. Abatement applicable to branded ready-made garments increased from 55% to 70% of the Retail Sale Price. The overall impact of GST on the textile industry and consumers will depend on how the available policy options are exercised in implementing GST in relation to textiles.

H)  Suggestions:

Some of the possible suggestions are mentioned below:-

1)      Raw material bank: Yarn constitutes more than 60% of the overall cost of handloom products. Typically major yarn spinners are not located within or near the handloom clusters and they do not sell yarn directly to the weaver/master weaver/cooperatives. There are a number of agents involved in the process of delivering the yarn from mill to weaver, which increases the price of yarn and sometimes creates artificial shortage of raw material availability, which in turn increases the price of yarn.

2)      Supply of handloom parts at subsidized rate: Many times handloom weavers can’t change the defective handloom parts due to its high price. This reduces the efficiency level of the handloom weavers and also deteriorates the quality of the products. Supply of handloom parts at subsidized rate will help handloom weavers to improve their efficiency, which will help in reduction of cost of production.

3)      Improved Dyeing facility: Color fastness is the most common quality problem with handloom products. Many consumers hesitate to purchase handloom products due to this problem. Usage of age old dyeing facility is the reason behind such quality problem.

4)      Product & design development: Supporting handloom weavers in product and design development will help them in reducing the cost of manufacturing and developing higher value added products, which can be sold with higher premium. This facility can be provided to handloom weavers through training or opening facility Centre at the cluster level.

I)      References:

1)      SatyaP.Dasz and AnuradhaSaha. (August 2011). Trade in Goods and Services and Economic Growth.

2)      Kumar, Nitin. Goods and Services Tax in India: A Way Forward. Global Journal of Multidisciplinary Studies. 2014.

3)      Sehrawat, Monika Dhanda, Upasana. Gst In India: A Key Tax Reform: International Journal of Research Granthaalayah. 2015.

4)      MrDebnath. (April 2016). Implementation of Goods and Service Tax (GST) in India and its Control over the Tax Collection.

5)      Poonam M. Goods and Services Tax in India: An Introductory Study, International Journal of Science Technology and Managemnt. 2017.

6)      Mahender P. GST Effect on Manufacturing Industry – India. International Journal of Managerial Studies and Research. 2017.