1. Encouraged only the organised sector
The Indian textile industry consists of established and unorganised sectors. A primary chunk of this industry belongs to the unorganised sector. The unstructured category includes small and medium-scale mills, handlooms, and handicrafts. With the introduction of GST, a gap in ITC (input tax credit) flow was witnessed. It is important to note that ITC is not to the unorganised sector. With GST, a newly introduced input credit chain is now shifting the balance towards the organised sector.
Through this, the unorganised textile trade has been impacted negatively. Staying updated with the latest developments is essential for businesses navigating these transitions, and they can follow GST news for regular insights.
2. Reduction in production cost
GST reduced India's garments industry's input costs by subsuming complicated taxes such as OCTROI, entry tax, luxury tax, etc., into a uniform tax system. Earlier, excise duty and VAT (Value Added Tax) applied to yarn and branded garments. This added to the input cost of the final product. Further, these costs differed from state to state. However, with uniformity and simplified taxes, the input cost has been reduced, thus lowering the manufacturing cost of textile products.
3. Reduced compliance burden
Formerly, various indirect taxes such as central excise, entry tax, OCTROI, VAT/ Central Sales taxes needed different agencies for their management. With the introduction of GST, all these taxes have been subsumed. Manufacturers are now experiencing a reduced compliance burden. Therefore, textile traders can now concentrate more on business expansion without worrying about complicated compliance activities.
4. Impact on exports
The recent rise in textile exports shows that there is rise in demand for Indian goods. This can also be due to reduced input costs, which might have been reflected in the final price of products. The growth of textile exports in India has been impressive in recent months.
Therefore, GST has impacted textile traders positively and negatively. However, the positive impact has been more significant, and its effects are now visible from the recent increase in textile trade activity. Implementing efficient logistics solutions like Eway Bill management has played a crucial role in streamlining operations and enhancing overall efficiency, further bolstering the textile industry's growth trajectory.
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