GST-CITI-6

1. Textiles Sector – GST Regime. Kautilya on taxation के लिए चित्र परिणाम.

2. TEXTILES SECTOR. Textiles and apparel industry in India is the 2nd largest employer in the country; 6 th largest exporter of textiles and apparel products Textiles Sector contributes – 5% to India’s GDP , 7% of industry output in value terms, 12% of the country’s export earnings..

3. GST REGIME – from 1.7.2017. Indirect Tax structure in the country consisted of multiplicity of taxes levied by Central & State Governments. The Industry suffered on account of the multiplicity of taxes, which resulted in – Imbalances; Lack of transparency and clarity. Cascading effect of prices on account of non-alignment of the taxes and resultant obstruction of the flow of Input Tax Credit in the value chain. Multiple taxes are subsumed in GST and the Industry is able to move forward seamlessly..

4. Rationalisation of Tax structure. PRE-GST REGIME GST REGIME Payment of Central Excise duty was optional GST is payable as per the rationalized duty structure Processing (job work) amounts to manufacture, due to emergence of a distinct product. Processing (Job work) is supply of service (not supply of goods). Central Excise duty was payable on the entire value, including the value of the materials received for job work. GST is payable only on the processing (job work) charges. Central Excise duty cannot be taken as Credit for payment of VAT and vice versa. ITC of GST already paid on the Capital goods, inputs and input services admissible at every stage of supply. Refund on account of inverted rate structure is NOT allowed. Refund on account of inverted rate structure is allowed..

5. GST: Input Tax Credit (ITC). Input Tax Credit (ITC) CGST/SGST/IGST.

6. Supply through Branches/Agent. As per Schedule-I, Branch Transfer would be regarded as supply, even if there is no consideration and the activity is not in the course or furtherance of business. A person who has obtained or is required to obtain more than one registration, whether in one State or more than one State, each such registrant will be treated as distinct persons. Transfer from one branch to another within the same State will not be considered as supply, if there is only one registration..

7. GST: Job work. Manufacturing sector get most jobs done on outsourced basis. Job work is Supply of services. Not supply of goods. Job work: Sending of raw materials / semi finished materials for some process as per the directions of the principal manufacturer. Undertaking any process By a person for another person On goods Belonging to another registered taxable person..

8. GST: Job work. Principal / Registered Taxpayer.

9. GST: Job work. Principal should declare the place of job worker as his additional place. No GST, when goods are sent to the job worker. GST for job charges should be paid by the job worker, if registered. GST for job charges should be paid by the Principal, if job worker is not registered. Declaration not required, where- Job worker is a registered person. Certain specified goods, as may be notified..

10. GST: Job work. Input Tax credit can be availed. Goods can be directly sent to job worker. Goods should be returned within 180 days. Capital goods also can be sent directly to the job worker. Capital goods should be returned within 2 years. If goods are not returned within the specified period- Reverse credit. Pay interest. If the goods are returned subsequently- Claim the credit again..

11. GST: Job work: Input Tax credit. Principal can take credit. Goods can be directly sent to job worker. Goods should be returned within 180 days. Capital goods also can be sent directly to the job worker. Capital goods should be returned within 2 years. If goods are not returned within the specified period- Reverse credit. Pay interest. If the goods are returned subsequently- Claim the credit..

12. Refund of unutilised ITC. Refund of unutilised Input Tax Credit is allowed as per Section 54(3) of the GST Act, 2017 under two circumstances: Zero rated supplies (Exports and supplies to SEZs) without payment of tax. Accumulation of credit on account of Inverted Duty Structure” (except on notified supplies). ‘Inverted duty structure’: A higher duty on inputs and a lower levy on finished products. This affects the cash flows for the Industry. Correction of anomalies: The GST Council has decided to correct the anomalies in the inverted duty structure..

13. INVERTED DUTY STRUCTURE. Unutilized Input Tax Credit (ITC) on account of inverted tax structure is permissible as refund [Sec.54(3)]. Exceptions: ( i ) If the output supplies are nil rated or fully exempt, (2) if the goods exported out of India are subject to export duty, (3) if supplier claims refund of output tax paid under IGST Act, or (4) if the supplier avails duty drawback or refund of IGST. Refund can be claimed for Zero Rated Supplies. Refund of ITC on input services: Not permissible. The policy decision of the Government was confirmed by the Hon’ble Supreme Court on 13/09/2021 in the case of UOI vs VKC Footsteps Pvt Ltd..

14. Problems faced by the Industry -. The person opting for the composition scheme cannot have inter-state sale of the goods. But he can have inter-state purchase the goods. Taxable person under the composition scheme cannot avail Input Tax credit and pass on the tax burden to the customers. These restrictions are the dampening factors for small traders as well as the manufacturers..

15. Problems faced by the Industry -. Compulsory registration.

16. GST: Composition scheme. 1% Tax for turnover upto Rs . 75 lakhs. No ITC. Composition Tax cannot be collected from the buyer. No ITC for the supplier No ITC for the buyer also. Composition scheme not applicable for – Inter state supplies. Job work..

17. GST: Export benefits. No GST liability. Zero rated supply GST can be paid and claimed as - Refund Rebate. Accumulated Input Tax Cresit (ITC) can be converted into real cash..

18. TEXTILES SECTOR – A feather on the Cap of the Nation.

19. The Journey continues…. AKM will be in constant interaction with CITI and its constituent Associations to provide a hand holding support by sharing the knowledge relating to the Textiles Sector. AKM will identify the problems being faced by the Industry on taxation matters and policy issues and make suitable representations to the authorities concerned. AKM will be in the constant endeavor to impart training on taxation matters and policy aspects, so as to facilitate the Industry to comply with the statutory stipulations in a hassle-free manner..