GST on Textile industry

Hope you had read the previous parts of the GST Duniya series, if not, then read it from here:

Part 1  Part 2 Part 3 Part 4 Part 5 Part 6 Part 7 PartPart 9 Part 10 Part 11

As we all have watched in news and nearby areas that textile industry is very much affected with GST regime. It is expected that tax burden is going to increase on textile industry. In this article,we will discuss about GST on Textile industry. There are so many points which are affecting textile industry. Lets discuss it one by one:

  1. Before GST regime, Natural fibres like cotton wool were exempted from tax but now they are taxable. So price of these fibres will increase accordingly.
  2. Second point is related to capital goods. Now for sure you will think that we are discussing about textile industry,so how capital goods will affect it.So here is the explanation: When any business imports the latest technology for manufacturing textiles,business had to pay excise duty but excise duty paid was not allowed as input tax credit. Simply speaking,we can say that under previous law,excise duty paid on these capital goods was not allowed. But in GST regime, input tax credit is available on capital goods.
  3. We are well aware of the fact that in India significant portion of textile industry operates under the unorganized sector due to which there was problem in availing input tax credit.But under GST regime,this problem will be solved as balance will be shifted towards organized sector.
  4. Under previous law, A businessman had to pay various fringe taxes like octroi,entry tax,etc.which are not required topay under GST Regime,so with elimination of these taxes,manufacturing cost will automatically reduced.
  5. Raw jute has been exempted from tax but even after this, therefore supplier dealings only in raw jute are not required to register themselves under GST.
  6. Now the most important point regarding GST on textile industries is regarding rates of GST: If transaction value of goods are not exceeding Rs 1000 per piece,then 5% GST will levy.If transaction value is exceeding Rs 1000 then 12% GST will levy. Transaction Value is Sales value Not MRP. Clearly differentiate the meaning of transaction value and MRP in your mind.

As a business practice, we know that sellers normally do not sells the goods on exact MRP.They offer some discount to buyers. So for knowing the exact percentage of GST levy,we will take in notice the transaction price on which seller has actually sold the product,not its MRP.For E.g. If MRP of a Silk Dress is Rs 1250 and seller sale it in Rs 950 so 5%GST will attract here as actual transaction value is not exceeding Rs 1000.


Part 12 ends here. For further knowledge on GST,stay connected with us.

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