Understanding GST Rates for Textile Manufacturers

The textile industry has urged the government to apply the lowest GST rate of 5 per cent across all value chains in the textile and apparel sector, to avoid any possibility of tax evasion. While the final decision on the rate is yet to be decided. Until then, let’s see some rates as per the decisions that were taken on the Day 1 of the Srinagar meeting of the GST Council’s fitment committee.

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Understanding GST Rates for Textile Manufacturers
Hello friends, we move on to the 3rd part of GST India series and today we analyze the GST
rates for Textile Manufacturers.
The textile industry has urged the government to apply the lowest GST rate of 5 per cent across
all value chains in the textile and apparel sector, to avoid any possibility of tax evasion. While
the final decision on the rate is yet to be decided. Until then, let’s see some rates as per the
decisions that were taken on the Day 1 of the Srinagar meeting of the GST Council’s fitment
committee.
The products and items used in the textile manufacturing process have been taxed according
to the following structure:
 Taxed at 12%
1. Wood articles: This includes all articles of wood such as clothes hangers, spools, cops,
bobbins, sewing thread reels, and turned wood for textile machinery.
2. Final products wholly made of quilted or textile materials.
 Taxed at 18%
1. Textile oil: Includes all textile oils other than those that contain petrol, diesel, and ATF
(Aviation Turbine Fluid).

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2. Finishing agents: Includes dye carriers, materials used to accelerate dyeing or fixing of
dyestuffs, dressings and mordants.
3. Machinery: This includes all machines for preparing textile fibers; spinning, doubling or
twisting machines and other machinery for producing textile yarns; textile reeling or winding
(including weft winding) machines and machines for preparing textile yarns for use on the
machines. Also, the machinery for washing, cleaning, wringing, drying, ironing, pressing
(including fusing presses), bleaching, dyeing, dressing, finishing, coating or impregnating textile
yarns, fabrics or made up textile articles and machines for applying the paste to the base fabric or
other support used in the manufacture of floor covering such as linoleum; machines for reeling,
unreeling, folding, cutting or pinking textile fabrics.
 Taxed at 28%
1. Lubricating oils and preparations: Includes oils and preparations of the kind used for oil or
grease treatment of textile materials. Excludes those oils that contain 70% or more by weight of
petroleum oils, or oils obtained from bituminous materials.
2. All ready-to-use products made from textiles: This includes products like travel cases, holsters
and similar containers; travelling bags, insulated food or beverages bags, toilet bags, rucksacks,
handbags, shopping bags, wallets, purses, map cases, cigarette cases, tobacco- pouches, tool
bags, sports bags, bottle- cases, jewellery boxes, powder boxes, cutlery cases and similar
containers made of textile materials.
A Uniform 5 per cent GST
In a representation to the Ministry of Commerce, apex industry body, the Clothing
Manufacturers Association of India (CMAI), has said that a low GST rate of 5 per cent applied
uniformly across the sector will propel domestic production, besides facilitating and encouraging
voluntary compliance. This would help India achieve its target of generating 35 million jobs and
attracting investments worth $200 billion by 2025, the representation said.
“A uniform 5 per cent rate of GST with no exemptions in the sector will remove current blocked
input taxes and tax cascading present in the industry, while also providing revenue enhancement
for the government. Even with 50 per cent compliance from the industry, the tax revenue across
the value chain under a uniform GST rate will see and increment of Rs 7,000 crore,” said Rahul
Mehta, President, CMAI.
The demand assumes significance in the wake of textile sector being the largest employer of
skilled and unskilled workforce after farming. Also, currently fabrics are exempted from taxes.
They account for as much as three–fourth of total consumption spending on textiles, estimated to
be around Rs 4.34 lakh crore in 2015-16. Extension of the tax base to fabrics and assuming 50
per cent of compliance, the government would generate Rs 10,850 crore.

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So, a comprehensive uniform low GST rate has the potential of not only removing inefficiencies
associated with exemptions and cascading in the sector, but also of increasing the government’s
revenue three fold.
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