Textile industries play a very important role in the development of the Indian economy with respect to GDP, Export promotion, employment, etc. It is one of the oldest manufacturing industries in India. It is the second-largest industry after agriculture, which provides skilled and unskilled employment. In this sector, 100% FDI is allowed by the Government under the Automatic Route. The Textile Industry contributes more than 10% of Total Export.
56th GST Council Meeting Update in the Textile Industry
In the 56th GST Council meeting, the central government has reduced the GST rate on man-made fibre and yarn in the textile industry from 18% to 5%.
| Description of Goods | Current GST Rate | New GST Rate From 22nd September |
|---|---|---|
| “Sewing thread of manmade filaments, whether or not put up for retail sale” | 12% | 5% |
| “Synthetic or artificial filament yarns” | 12% | 5% |
| “Yarn of manmade staple fibres” | 12% | 5% |
| “Wadding of textile materials and articles thereof; such as absorbent cotton wool (except cigarette filter rods)” | 12% | 5% |
| “Felt, whether or not impregnate, coated, covered or laminated” | 12% | 5% |
| “Nonwovens, whether or not impregnated, coated, covered or laminated” | 12% | 5% |
| “Rubber thread and cord, textile-covered; textile yarn, and strip and the like of heading 5404 or 5405, impregnated, coated, covered or sheathed with rubber or plastics” | 12% | 5% |
| “Metallised yarn, whether or not gimped, being textile yarn or strip or the like of heading 5404 or 5405, combined with metal in the form of thread, strip or powder or covered with metal [ other than: (i) real zari thread (gold) and silver thread combined with textile thread (ii) imitation zari thread or yan known by any name in trade parlance]” | 12% | 5% |
| “Gimped yarn, and strip and the like of heading 5404 or 5405, gimped (other than those of heading 5605 and gimped horsehair yarn); chenille yarn (including flock chenille yarn); loop wale-yarn” | 12% | 5% |
| “Twine, cordage, ropes and cables, whether or not plaited or braided and whether or not impregnated, coated, covered or sheathed with rubber or plastics [other than jute twine, coir cordage or ropes]” | 12% | 5% |
| “Articles of yarn, strip or the like of heading 5404 or 5405, twine, cordage, rope or cables, not elsewhere specified or included” | 12% | 5% |
| “Carpets and other textile floor coverings, knotted, whether or not made up” | 12% | 5% |
| “Carpets and other textile floor coverings, woven, not tufted or flocked, whether or not made up, including “Kelem”, “Schumacks”, “Karamanie” and similar handwoven rugs” | 12% | 5% |
| “Carpets and other textile floor coverings (including Turf), tufted, whether or not made up” | 12% | 5% |
| “Carpets and other textile floor coverings, of felt, not tufted or flocked, whether or not made up” | 12% | 5% |
| Other carpets and other textile floor coverings, whether or not made up; such as Mats and mattings including Bath Mats, where cotton predominates by weight, of Handloom, Cotton Rugs of handloom” | 12% | 5% |
| “Terry towelling and similar woven terry fabrics, other than narrow fabrics of heading 5806; tufted textile fabrics, other than products of heading 5703” | 12% | 5% |
| “Gauze, other than narrow fabrics of heading 5806” | 12% | 5% |
| “Tulles and other net fabrics, not including woven, knitted or crocheted fabrics; lace in the piece, in strips or in motifs, other than fabrics of headings 6002 to 6006” | 12% | 5% |
| “Hand-woven tapestries of the type Gobelins, Flanders, Aubusson, Beauvais and the like, and needle-worked tapestries (for example, petit point, cross stitch), whether or not made up” | 12% | 5% |
| “Labels, badges and similar articles of textile materials, in the piece, in strips or cut to shape or size, not embroidered” | 12% | 5% |
| “Braids in the piece; ornamental trimmings in the piece, without embroidery, other than knitted or crocheted; tassels, pompons and similar articles[other than saree fall]” | 12% | 5% |
| “Woven fabrics of metal thread and woven fabrics of metallised yarn of heading 5605, of a kind used in apparel, as furnishing fabrics or for similar purposes, not elsewhere specified or included; such as Zari borders” | 12% | 5% |
| “Embroidery in the piece, in strips or in motifs, Embroidered badges, motifs and the like” | 12% | 5% |
| “Quilted textile products in the piece, composed of one or more layers of textile materials assembled with padding by stitching or otherwise, other than embroidery of heading 5810″ | 12% | 5% |
| “Textile fabrics coated with gum or my laceous substances, of a kind used for the outer covers of books or the like; tracing cloth; prepared painting canvas; buckram and similar stiffened textile fabrics of a kind used for hat foundations” | 12% | 5% |
| “Tyre cord fabric of high tenacity yarn of nylon or other polyamides, polyesters or viscose rayon” | 12% | 5% |
| “Textile fabrics impregnated, coated, covered or laminated with plastics, other than those of heading 5902″ | 12% | 5% |
| “Linoleum, whether or not cut to shape; floor coverings consisting of a coating or covering applied on a textile backing, whether or not cut to shape” | 12% | 5% |
| “Textile wall coverings” | 12% | 5% |
| “Rubberised textile fabrics, other than those of heading 5902″ | 12% | 5% |
| “Textile fabrics otherwise impregnated, coated or covered; painted canvas being theatrical scenery, studio backcloths or the like” | 12% | 5% |
| Transmission or conveyor belts or belting of textile material, whether or not impregnated, coated, covered or laminated with plastics, or reinforced with metal or other material” | 12% | 5% |
| “Textile hose piping and similar textile tubing, with or without lining, armour or accessories of other materials” | 12% | 5% |
| Transmission or conveyor belts or belting of textile material, whether or not impregnated, coated, covered or laminated with plastics, or reinforced with metal or other material” | 12% | 5% |
| “Textile products and articles, for technical uses, specified in Note 7 to this Chapter; such as Textile fabrics, felt and felt-lined woven fabrics, coated, covered or laminated with rubber, or other material, of a kind used for card clothing, and similar fabrics of a kind used for other technical purposes, including narrow fabrics made of velvet impregnated with rubber, for covering weaving spindles (weaving beams); Bolting cloth, whether or Notmade up; Felt for cotton textile industries, woven; Woven textiles felt, whether or not impregnated or coated, of a kind commonly used in other machines, Cotton fabrics and articles used in machinery and plant, Jute fabrics and articles used in machinery or plant, Textile fabrics of metalised yarn of a kind commonly used in paper making or other machinery, the Straining cloth of a kind used in oil presses or the like, including that of human hair, Paper maker’s felt, woven, Gaskets, washers, polishing discs and other machinery parts of textile articles.” | 12% | 5% |
| “Textile caps” | 12% | 5% |
| “Hats (knitted/crocheted) or made up from lace or other textile fabrics” | 12% | 5% |
| “Products wholly made of quilted textile material not exceeding Rs. 2500 per piece” | 12% | 5% |
| Description of Goods | Current GST Rate | New GST Rate from 22nd September |
|---|---|---|
| Goods Under (5402, 5403, 5404, 5405, 5406) | 18% | 5% |
| “Synthetic or artificial filament tow” | 18% | 5% |
| “Synthetic or artificial staple fibres” | 18% | 5% |
| “Waste of manmade fibres” | 18% | 5% |
| Description of Goods | Current GST Rate | New GST Rate from 22nd September |
|---|---|---|
| “Articles of apparel and clothing accessories, knitted or crocheted, of sale value exceeding Rs. 2500 per piece” | 12% | 18% |
| “Articles of apparel and clothing accessories, not knitted or crocheted, of sale value exceeding Rs. 2500 per piece” | 12% | 18% |
| “Other made up textile articles, sets of sale value exceeding Rs. 2500 per piece [other than Worn clothing and other worn articles; rags]” | 12% | 18% |
| “Cotton quilts of sale value exceeding Rs. 2500 per piece” | 12% | 18% |
| “Products wholly made of quilted textile material exceeding Rs. 2500 per piece” | 12% | 18% |
Latest Update in the Textile Industry
- 02nd February 2022: The minister of textiles has showcased the order related to the undersigned in the exercise of the powers vested under clause 6(1) (iii) and clause 5 for the Jute and Jute Textiles Control Order 2016. Read More
Textile Industry is divided into two segments: firstly, Unorganised and secondly Organised. The unorganised sector consists of Handloom, handicraft, small and medium-scale mills and the organised sector consists of spinning, apparel and garments segment, which applies modern machinery and techniques. The rate structure for the textiles is decided at 5 percent and 18 percent for cotton fibre and man-made synthetic fibre, respectively. While silk and jute are totally exempted from the GST purview. The GST rate on apparels is also decided on a category basis, as Apparels below INR 1000 will be attracting 5 percent GST while those above this mark will be taxed at 12 percent.
In its meeting held on 5th August, the GST council took some positive and relaxing decisions for the textile industry. The council mentioned rules regarding the e-way bill and rates. And at the same time, the rates of GST have been reduced from 18 percent to 5 percent on job work of all textiles and related products manufactured. The finance minister Arun Jaitley, who also heads the GST council along with the representatives of states in general also finalized the e-way bill rules and regulations. In this new decided norm, the registration of goods worth more than INR 50,000 has been made mandatory before the transport is carried on and even that for more than 10 kilometres.
Mainly Two types of Indirect Taxes considered by the government is Central Excise Duties and Service Tax which was under wide use. Service is not levied on Textile since it comes under Goods. Under the current taxation system, textile products are mostly exempted or are taxed at a very low rate. State Governments have to stop levying Sales Tax after the discontinuation of Additional Excise Duty. From the tax rate structure, it is seen that cotton fibre will be gaining momentum by the GST rate decided for it. Overall it is concluded that the final rates are very much less than the previous scheme and will definitely benefit the whole industry in the long run.
Leaving behind the fragmented structure of the supply chain, the GST will consolidate this structure and will present a better supply chain management to the industry. The self-compliance necessity in the GST will also track down the revenue even if the tax rates are low for some general benefiting of masses.
SIGA Requested Govt to Simplify the Hard GST Law Instruction
The South India Garment Association (SIGA) has asked the government to simplify the cumbersome and harder Goods and Services Tax (GST) Law instruct the financial firm to uphold the renewal of credit, excluding the complications which provides working capital at a much lower interest rate and implement the 12% high GST slab upon the garments, whereas the transaction value exceeds ₹1,000.
Impact of GST Rise on Textile Industry
The GST council had announced earlier this year to increase the rate of GST on goods related to the textile industry. However, the finance minister, Smt. Nirmala Sithraman said that the council has decided to postpone the increase until further notice. Some natural fibres like cotton and wool were exempt from any tax liability but after the council meeting, it was decided that these will be taxed under GST from the date of the increase.
It is clear that the rate of GST on the textile industry will be increased sooner or later, so let’s have a look at the advantages of the increase and implementation of new taxes on textile products:
Easy Flow of ITC
A great portion of traders in the textile industry is not registered with GST due to which a barrier is created in the flow of Input Tax Credit. With the implementation of taxes on natural fibers, more and more traders will get themselves registered with GST which will stimulate the proper flow of ITC in the market and the traders will be benefited from it too.
- Reduced Manufacturing Costs
- Fringe taxes like Octroi and entry/luxury taxes will be converted into a single GST that will bring down the manufacturing cost of textile products.
ITC on Capital Goods
According to the current provisions of ITC, credit is not allowed on the procurement of the latest machines through imports. The excise paid on imports increases the price of procurement. If GST is introduced, it will be a compulsion to credit ITC which will reduce the cost of capital goods, indirectly.
Boost to Exports
The introduction of GST will help in registering more and more traders with GST. The registration of traders will take these traders to the export market. The traders hesitate to get their products for exports because of its extensive process but under GST, barriers like duty drawbacks will be removed and ITC too will ease the process of exports. Under the export promotion capital goods scheme, the exporters are given exemption of duty if the export value is six times the value of duty within six years from the export. This scheme will lose its value with the implementation of GST.
| Cotton Composition | HSN Code | GST Tax Rate |
|---|---|---|
| Products with more than 85% cotton content & weight is less than 200 gm/sq mt | 5208 | 5% |
| Products with more than 85% cotton content & weight is greater than 200 gm/sq mt | 5209 | 5% |
| Products with less than 85% cotton content, mixed with additional fabrics & weight is less than 200 gm/sq mt | 5210 | 5% |
| Products with less than 85% cotton content, mixed with additional fabrics & weight is greater than 200 gm/sq mt | 5211 | 5% |
| Other Cotton Products | 5212 | 5% |
GST Rates & HSN Codes For Cotton Products like- Dhoti, Saree, Zari Border Saree, Zari Border Dhoti, Shirting, Casement, Viol, Sheeting, Suti, Cambric, Lawn, Latha, Lungi & furnishing fabrics.
| Yarn Specification | HSN Code | GST Tax Rate |
|---|---|---|
| Synthetic Monofilament of 67 Decitex or more and of which No cross-sectional dimensions exceed 1 mm; strips & the Like of synthetic textile material of an apparent width not exceeding 5 mm. | 5407 | 5% |
| Artificial Monofilament of 67 Decitex or more and of which No cross-sectional dimensions exceed 1 mm; strips & the Like of synthetic textile material of an apparent width not exceeding 5 mm. | 5408 | 5% |
COMMODITY : TEXTILE GST 5% HSN CODE 998821 OR 520811 OR 551299
BILL DATE 15.12.21
SALE BASIC AMT RS 1,00,000=00
ADD GST 5% RS 5,000=00
BILL AMT RS 1,05,000=00
NOW BUYER RETURN GOODS : BASIC RS 10000=00 ON 05.01.2022
W.E.F TEXTILE GST IS 12%
PLS CONFIRM BUYER ISSUE DEBIT NOTE WITH GST 12%
BUYER should ISSUE DEBIT NOTE WITH GST 5% not with 12%, for more detail please consult GST practitioner