Why GST cannot be abolished on textiles/garments goods including fabric as per Government of India
by Paras Mehra 2.26K
1.0 Introduction
The war between the textiles industry and the government over the GST implementation is getting worse day by day and both the parties are very firm on their stand. The textile industry wants GST to be removed on fabrics and on the other hand, government is very firm and not accepting any demand of the industry.
As said, the issue is so serious that the same was also raised in the Rajya Sabha and finally government clears its stance about as to why government cannot accept the demand of the traders and cannot zero the tax on the aforesaid goods.
Let us understand the government point of view on why GST cannot be abolished on textiles goods including fabric etc.
2.0 The government view on abolishment of GST on textiles goods
Government said that people has to understand the structure of taxation. Under GST, a chain structure went on and if the same is broken then the whole concept of GST perish away. Therefore, government cannot make goods 0 rated or exempt from GST.
Further, there are following reasons behind why GST cannot be abolished on textiles (fabric):
- NIL GST on fabrics will break the input tax credit (ITC) chain and then the manufacturers of garments will not be able to get the credit of tax on previous purchase.
- Nil GST on fabrics will result in zero rating of imported fabrics. In other words, GST is charged on each product imported so that the price of imported product can be increased so that it does not spoil the domestic market.
But if fabrics are made zero rated, then there shall be no GST on imported fabric, while domestic fabric will continue to bear the burden of input taxes and hence, the domestic industry shall spoil.
- Government further states that the GST rates are almost equal or less in comparison to previous tax. And therefore the price of fabrics is not likely to go up.
Government also stated that it is not the first time that the government is imposing any tax on the garment industry. The government also said that the central excise was there on garments in 2003-04.
3.0 Conclusion
The above article was written based upon the press release of the government which is being released to clarify the doubts of the people. In case you have any issue, then you may write to us at info@hubco.in.
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