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Textile and apparel industry await their GST destiny

It was just a few days back that during a parliament session, India finalised a four-tier Goods and Services Tax (GST) structure – ranging from 5% to 28% – taking a significant step towards implementing the biggest reform of indirect taxes, which the government hopes will shield the common man from price shocks. 

The fixing of rates by the GST Council marks a crucial milestone towards the rollout of the single tax that will replace various state and central levies and create a seamless national market for goods and services. 

The four GST slabs fixed are 5%, 12% 18% and 28%. The fifth rate for gold and precious metals, which was earlier proposed at 4%, will be decided later but is likely to be lower. 
The decision on GST will not have much of an impact on the everyday necessities of the common man as the GST Council, the apex decision-making body for the tax, decided to exempt food items or keep most of them at the lowest rate of 5%. But the question of Textiles and apparel and the garment sector's destiny under the GST purview is still unclear and whether the same will be treated under the necessity domain is a question that only when the final decree on GST is implemented will be known.


In addition it was also mentioned that more than 50% of the items in the Consumer Price Index basket would be exempted under GST and the remainder placed in the lowest bracket. Exempted items won’t have the benefit of input tax credit. 

Sports utility vehicles, aerated drinks, pan masala and tobacco products are unlikely to see any change in their overall tax burden with a new cess proposed on them. Tobacco currently attracts a total tax of about 65% and for aerated drinks, the current rate is about 40%. These goods will be taxed at the highest rate of 28% and topped up with a cess to raise the effective tax. 

However everyday items like the Soaps, oil, shaving kits, small cars and other goods consumed by the middle class, which faces higher tax incidence of 30-31% including state and central taxes, could become cheaper as they are likely to be placed in the lower tax slab of 18% and not the equivalent tax slab of 28%. We can only hope that the apparel industry is treated with utmost importance and considered within the necessity slab in the time to come.

*image courtesy Economic Times





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