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Textile Sector

India’s largest employment generator, textile sector is concern over GST implementation

The textiles and garment sector is one of the biggest and the largest sector in the India. Textile sector is also big employment generator. Before GST this big sector was out of taxes network. But in GST regime textiles and garment sector is covered in tax bracket.There so many small power looms and weaving and manufacturing units are in Surat, Ahmedabad, Erode, Bhilwara, Mumbai etc. Textile sector is confused and concerns over GST implementation. Most of the units are operating on job-work basis and they are generating large employment in the India.

Here, we are presenting few points on behalf of textile and garment business community.


No. Facts Guidance
1 Shanti Textile Ltd is in Furnishing Fabrics Industries for curtain and upholstery fabrics. The company mainly deal in Woven, Knitted, Polyester and Coated fabrics. The company wants to know that the chapter number under which its fabrics as mentioned herein above are covered and GST rate applicable to company? Shanti Textile Ltd is involve in various types of fabrics and the woven fabrics are classifiable under various headings depending upon their composition.The knitted fabrics fall under Chapter 60 (GST-5%), Polyester fabrics fall under Chapter 54 (Man-made textile materials) and 55(Man-made staple fibers)(GST-5% or 18%) respectively and coated fabrics fall under Chapter 59 (GST-12%).
 2  Mr. Sanjay have a unit of Cotton trouser where customer gives him fabric and he has to convert it into trouser. What would be the rate of GST applicable to him?  As per provision of Section 2 (68) of the CGST Act, 2017 The services provided by you fall under the category of job work. So the GST rate for job work in relation to trouser, which is a wearing apparel, is 18%.
 3  Does cotton farmer is required to register under GST and pay GST? As under Chapter heading 5201 and 5203 covers cotton and applicable rate on cotton is 5%  No, as cotton farmer is agriculturist. As per sub-section (b) of subsection (1) of section 23 of the CGST act, 2017 an agriculturist,to the extent of supply of produce out of cultivation of land is not liable to registration.
 4  Mr. Hemant Shah has as cloth and dress material shop. Dress material are sold by length. They can include up to 3 pieces. These can be plain or embroidered (value-addition or further worked upon). Where should such semi finished dress material be classified?  Dress material sets are classified under heading 6307 and the rate of tax on the dress materials/patterns is similar to the apparels i.e. for dress material of value not below Rs.1000/-, tax at 5% would be charged and for dress material of value more than Rs.1000/-, tax at 12% would be charged.
 5  Mr.Mehul Rajpara is a registered GST taxpayer, who buy raw cotton from the farmer (Agriculturist). Does Mr. Mehul Rajpara has to pay GST under RCM?  Yes, The cotton farmer is not liable to registration, so he is a unregistered person as per GST act, Mr. Mehul Rajpara is a registered GST Tax payer,who buys raw cotton from unregistered person (farmer), cotton fall under heading 5201 and 5203 and attract 5% rate. So, Mr. Mehul Rajpara is liable to pay GST on reverse charges basis as per Section 9(4) of the CGST Act,2017.
 6  Mr.Ashok Sodhi is owner of textile trading firm. His firm was unregistered in earlier State Vat Act. He is dealing in textile fabrics which was exempted in earlier State Vat Act. His query is if he get registered under New GST Act, will he be eligible to avail of ITC on his closing stock of textile fabrics on the appointed day ?

 Mr. Ashokj Sodhi is not eligible to avail of ITC on his closing stock of textile fabrics on the appointed day as per provision of SGST ACt, 2017, Because Mr. Ashok Sodhi are trading goods which are exempted from tax under the State Act.

But, under GST regime Mr. Ashok Sodhi will get some benefits. He will be eligible to enjoy CENVAT credit as Central Tax on your stock if Mr. Ashok have invoices or other prescribed documents evidencing payment of excise duty under the existing law and which were issued not earlier than 12 months immediately preceding the appointed day.If you do not have such prescribed documents evidencing payment of excise duty in respect of your stock of textile goods, you will be eligible to avail input tax credit on goods held in stock on the appointed day at the rate of 40% of the central tax on your intra-State supply of goods after the appointed day or 20% of the integrated tax on your inter-State supply of goods after paying central tax/integrated tax on such supply. You are allowed to enjoy the scheme for six months from the appointed day or till such stock is sold out, whichever is earlier, and tax paid by you shall be credited as central tax in your electronic credit ledger.

 7  It is presumed that suppliers of only in raw jute are not required to register themselves under GST, as raw jute has been attract NIL GST rate (refer Chapter 53). But some Jute Mills are asking their raw jute suppliers to mandatory register themselves otherwise company will not buy raw jute from unregistered dealer. Clarification required whether raw jute suppliers are required to registered themselves in GST regime.  As per proviso of sub-section (a) of sub-section (1) of Section 23 of the CGST Act, 2017 the suppliers dealing only in raw jute which attracts ‘NIL’ GST rate, are not required to register. Even Jute Mills which are registered also not required to pay tax under RCM as per provision of Sub-Section (4) of section 9 of CGST Act, 2017, as jute is under ‘Nil’ rate bracket.
 8  Does the cotton farmer is required to register under GST Act,because Cotton is under 5% rate slab. ?  The answer is ‘No‘. Because as per section 23(1)(b) of the Central Goods and Service Tax Act, 2017, cotton farmer produces cotton from cultivation of land is not eligible to registration.
 9  Is HSN code required by law to quote in invoice by B2C traders & B2B traders? 1. Upto Rs. 1.5 Crores turnover, no HSN code is required to quote in Invoice.
2. From Rs. 1.5 Crores to 5 Crores turnover, trader has to mention first 2 digit of HSN code in Ivoice.
3. Above Rs. 5 Crores turnover,traders has to mention first 4 digit of HSN code in invoice.
 10 In textile sector most of the looms and weaving units runs on job-work basis. In that case M/s. X manufacturer of garments, sends some goods for job-work to M/s. Y unit.

Q.1 Will this supply of goods send for job-work be treated as taxable supply in GST?
Q.2 Is it possible that M/s. X supply the goods after completion of job work from the place of business of the job worker?

 Ans. 1 M/s. X can send goods to a job worker for job-work without payment of GST and get back the same after completion of job work, subject to goods should be return within one year from the date of supply, if goods not return with in stipulated time period, then M/s. X has to pay GST along with Interest on it.

Ans. 2 M/s. X can supply the completed goods from the place of business of the job worker, but condition is that if job worker is not registered under GST then M/s. X has to declare the place of business of the job-worker as M/s. X’s additional place of business


While Considering sales value of textile goods not exceeding Rs. 1000/- gst rate is 5% and goods value is exceeding Rs.1000/-, gst rate is 12%. Textile dealers are confused that this sales value is transaction value or MRP value.

Sales value will be transaction value on which tax has to pay and not MRP value printed on products.
12  Vora Lamination Works doing job work of textile lamination for their customers. Invoice components are value of materials used for job-work + labour charges and margin. Whether Vora lamination works is eligible to avail input tax credits on material used for job-work?  Yes, Vora Lamination Works can take ITC on materials used for job-work.

Disclaimer: The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and do not hold any legal validity.

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