By TIOL News Service

NEW DELHI, DEC 29, 2012: INDIA's Textiles Ministry has decided to study the likely impact of proposed Goods and Services Tax (GST) on the textiles sector with a view to improve its competitiveness and raising its share in the global market.

Anticipating GST introduction in the country in the forthcoming financial year beginning 1 April 2013, the Ministry has expressed alarm over the fact that Indian textiles industry is losing its global market share to its counterparts from smaller countries such as Bangladesh, Vietnam and Pakistan.

As put by the Ministry, “Our export of textiles have touched .16 billion in 2011-12, but that of China are at 7 billion. In apparel where maximum value addition takes place, countries like Bangladesh export more than India. In this context, it is important that we provide a suitable tax structure to this sector which increases its competitiveness and helps in achieving higher global market share.”

The Ministry has thus invited expression of interest from consultancy entities for undertaking a study on implications of GST for textiles sector. Pointing out that GST is supposed to subsume most indirect taxes, it says that the Government currently does not reimburse certain local taxes to exporters.

The entity that bags the study assignment would have to have a large mandate that includes mapping the entire textiles value chain with current exemptions and rates of custom duties, excise duties, VAT and other indirect taxes including service tax on goods and services in all States (provinces).

The study is expected to throw light on the problems faced by the various sectors of the textiles industry in the current taxation regime.

The study would analyze the need and justification for exempting any sub-sector or item in textiles industry under GST including area based exemptions like special economic zones and export-oriented units.

It would also would examine the implications (both positive and negative) of GST on vulnerable segments of textiles like handlooms, block printing, screen printing, tie & dye and other hand processing units.

The study, which is expected to be completed in six months, would carry recommend revenue neutral rates of GST (both Central GST & State GST) for all segments of textiles sector and throw light on the implications of recommendations.

The consultant would suggest initiatives that the industry should take to adjust to proposed new tax structure.