GST and textile: Good for natural fibres, not for manmade

Published By Avalara India, 1 Sep 2017

GST and textile: Good for natural fibres, not for manmade

Working out tax rates for different goods and services was a huge challenge for India’s Goods and Services Tax (GST) Council. The rates had to be fixed in line with various non-negotiable objectives. These included:
Ensuring items did not become more expensive post-GST than they were before

    • Assuring adequate mobilisation of revenues to maintain financial stability in state government

    • Allowing important sectors of the economy to function smoothly by continuing to enjoy traditional incentives

    • With respect to the last objective, fixing tax rates for the textile sector was a formidable task. It is therefore hardly surprising that these rates were among the last to be announced by the council.

    • The textile industry is of critical significance to the Indian economy. Both textile products and apparels are important exports and major sources of foreign exchange.

The textile industry is also among the largest providers of employment, particularly female employment, and generates numerous jobs for households. The industry is dominated by small and micro enterprises at various levels of the value chain, including household enterprises that contribute substantively to textile industry production.

Intricate value chain

Characterised by an intricate value chain, the textile industry provides livelihoods to people at various levels, including those who work with fibres, such as spinners; those who make fabrics, such as weavers; and finally, at a more downstream level, various workers connected to the production of finished items, such as those who produce readymade apparels.

The nature of the textile value chain makes it evident that........
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