The Indian clothing industry is one of the biggest industry in the Asian continent because it provides employment to a great number of qualified and unqualified people in the country. It contributes about 10% of its total annual export, and due to the GST, there is a huge increase in value (costlier). GST would continuously affect the value of cotton in the textile industry, and it is mostly chosen by medium and small enterprises.
Before getting into Impact of GST on Clothing Industry feel free to read this Introduction About T-Shirt Manufacturing
At present natural fibers like wool and cotton, which are free from tax, would be taxed less than the GST. In spite of this, the textile industry would get benefits from the introduction of GST:
Drop in Manufacturing Cost
GST (Goods and Service Tax) is considering the different taxes like entry tax, luxury tax, Octroi etc., which helps decrease in manufacturing cost in the textile industry.
Smash in Input Credit Chain
The major section of Indian textile industry operates in the unorganized sector, therefore it creates a break in the flow of input tax credit. GST enables this credit system, which creates a balance towards the organized sector.
Input credit permitted on Capital Goods
At present, the import cost of the latest technology for manufacturing textile goods is very costly as the excise duty paid is prohibited as input tax credit. While under GST, the input tax credit available for the tax paid on capital goods.