Unified GST from January 1st could cause problems for Indian textile MSME

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India’s textile sector Uniformity of GST structure From January 1, 2022. The increase in GST for finished products such as apparel Small Business (MSME) According to tax experts, these play an important role in the field.

The Goods and Services Tax (GST) will be raised by 7% on finished products such as apparel and textiles from the beginning of next year, according to a notice issued by the Treasury on November 18. The GST rate for fabrics will increase from 5% to 12%, and the GST rate for apparel of all value will increase to 12%. This is compared to before products priced up to £ 1,000 were subject to 5% GST.

Industry experts feel that uniform rates make it harder for a sector to float, leading to smaller players being pushed into unorganized sectors. “It is very clear that the MSME sector is dominant in the Indian textile industry. The Indian textile industry provides hundreds of thousands of people with work and business opportunities. Like any other sector. Now, due to government policy, MSME is also having problems in the textile industry, “they say.

The textile sector in India may experience some confusion as the GST structure was unified from January 1, 2022. Increasing GST for finished products such as apparel will have a greater economic impact for small and medium-sized enterprises (MSMEs). According to tax experts, it plays an important role in the field.

Raising the GST puts more stress on the working capital requirements of the industry, especially MSME. Increasing tax rates could put an additional financial burden on the MSME section of the industry, which is already under stress due to sluggish sales and rising input costs. It can also lead to higher costs for end consumers.

However, the government’s decision to equalize tax rates across the supply chain should help the industry in the long run by releasing blocked working capital in the form of cumulative temporary tax credits (ITCs). Claims to be. The purpose behind the proposed increase is to correct the anomalies associated with ITC refunds due to the reverse tariff structure. A reverse tariff structure means that the tax on the input is high and the tax on the product or final product is low. Simply put, companies face higher GST rates for raw materials than for finished products. The GST Council has addressed the issue of reverse tariff structure in many industries.

Upstream industry is receiving the same response as being content with the government’s decision. Sanjay Garg, executive director of Punjab-based spinning mill Longowalia Yarns Ltd, said demand from the industry awaits. Unification of tax systems will bring a better ecosystem to the industry. Garg, also chairman of the North Indian Textile Factory Association (NITMA), suggests that the downstream textile and apparel industry needs to be more efficient in the current scenario. “India’s textile industry needs to be prepared to face global competition, so it needs to be more efficient throughout the value chain.”

However, MSME is not pleased with the changes in the GST structure and is demanding the withdrawal of the GST rate increase. Recently, the Kerala Clothing and Textile Dealer Welfare Association (KTGA) has decided to put strong pressure on the central government towards this demand. This increase will have a significant impact on the businesses of SMEs affected by last year’s pandemic. Previously, the All India Traders Federation (CAIT) made the same request.

Fiber2Fashion News Desk (KUL)

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Unified GST from January 1st could cause problems for Indian textile MSME

Source link Unified GST from January 1st could cause problems for Indian textile MSME

The post Unified GST from January 1st could cause problems for Indian textile MSME appeared first on Eminetra.

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